LIM & TAN SECURITIES 16 COLLYER QUAY #15-00 INCOME @ RAFFLES SINGAPORE 049318 TEL: 65330595 www.limtan.com.sg RCB REG NO. 197301030W

DAILY REVIEW | 06 FEBRUARY 2015 FINANCIAL MARKETS

MAJOR MARKET INDICES

FSSTI

CLOSE

1D (%)

MTD (%)

YTD (%)

3406.6

-0.3

0.5

1.2

17884.9

1.2

4.2

0.3

S&P 500

2062.5

1.0

3.4

0.2

NASDAQ

4765.1

1.0

2.8

0.6

FTSE (UK)

6865.9

0.1

1.7

4.6

Nikkei

17504.6

-1.0

-1.0

0.3

Hang Seng

24765.5

0.3

1.1

4.9

3136.5

-1.2

-2.3

-3.0

16.9

-8.1

-19.6

-12.2

Dow Jones

Shanghai Composite VIX

SG MARKET SUMMARY Daily Market Value (S$ 'm)

1127.0

Daily Market Volume (mln)

1255.7

52-week STI High

3432.6

52-week STI Low

2972.4

KEY INTEREST RATES CLOSE

1D (%)

MTD (%)

YTD (%)

3 Mth SGD SIBOR

0.7

3 Mth Swap Offer Rate

0.7

-0.8

0.3

47.2

2.7

7.1

SG 10 YR Bond Yield

-0.2

1.9

-2.8

1.4

-16.4

US 10 YR Bond Yield

1.8

3.9

11.0

-16.2

As at 8.00am SG time

CLOSE

1D (%)

MTD (%)

YTD (%)

Dow Jones

17794.0

0.1

4.1

0.2

S&P 500

2056.0

0.0

3.4

0.2

NASDAQ

4251.5

0.1

2.7

0.4

CLOSE

1D (%)

MTD (%)

YTD (%)

1266.2

0.1

-1.4

6.9

50.5

4.2

4.6

-5.2

564.0

-0.9

-7.2

-27.9

8435.0

1.4

3.6

-0.8

US FUTURES

COMMODITIES

Gold Crude Oil Baltic Dry Crude Palm Oil

FSSTI INDEX 3600 3500

52-week price chart

3400 3300 3200 3100 3000

US stocks rose 1-1.5%, recovering all its losses in 2015. Denbury Resources and Noble Corp jumped more than 3.7 % as oil climbed 4.7%. Pfizer added 2.9% as it agreed to buy Hospira, the biggest provider of injectable drugs and infusion technology. Hospira jumped 35%. US crude prices gained more than 6% last night, after plunging 9 % on Wednesday. Oil’s swings have intensified since the Organization of Petroleum Exporting Countries decided in November’14 not to cut output amid a global surplus. 78 percent of S&P 500 members that have posted results this season have beaten analyst estimates, while 55 percent have topped sales projections.

IDEA OF THE DAY Global Logistics Properties ($2.48, down 3.0 cents) reported 3Q FY15 earnings of US$112.4 mln (-36.2% yoy) on the back of 0.7% increase in Group revenue to US$179.0 mln, mainly due to higher Japan revaluation gains in the prior year period. Pro-forma earnings excluding revaluation gains were up 58%. During the quarter, GLP completed 630,000 sqm (approximately 6.8 mln sq ft) of developments in China with a total investment cost of US$308 mln. GLP’s effective share was US$138 mln and the company recognized US$40 mln of development revaluation gains. Leasing ratios remain stable in 3Q FY15, with China at 89%, Japan 99% and Brazil 98%. In China, GLP signed 600,000 sqm (6.5 mln sq ft) of new and expansion leases in 3Q FY15, up 25% yoy. Rents on leases renewed during the quarter in China increased 7.3%. In fact, repeat customers comprised about 2/3 of new leases in China underpinned by strong customer demand especially in the FMCG, retail, cold storage and e-commerce industries. In Japan, new and expansion leases in 3Q FY15 totaled 127,000 sqm (1.2 mln sq ft), and rents on leases renewed during the quarter increased 2.2%. In Brazil, new and expansion leases in 3Q FY15 totaled 14,000 sqm (151,000 sq ft). However, we understand that GLP’s FY15 expected China development completions of US$1.1 bln have been lowered to US$1.0 bln due to delays in the completion permitting process. US$70 mln of projects will be physically completed in 4Q FY15 and be completed when the permits are received two months later in May 2015. GLP remains on track to meet its FY15 development completions target for Japan and Brazil. In FY16, GLP expects to complete US$2.3 bln of developments (GLP share: US$1.0 bln) across the Group, up 79% yoy. GLP’s development pipeline over the next 3 years is expected to generate about US$1 bln (GLP share) of revaluation gains earned on developments. GLP recently announced that it would be acquiring one of the largest logistics real estate portfolios in the United States for US$8.1 bln. The move is in line with GLP’s growth strategy of expanding into the best logistics markets internationally via its fund management platform and will bring the company’s assets under fund management to over US$20 bln. The transaction is expected to close in 4Q FY15. GLP will initially hold a 55% stake in the acquired portfolio (GLP US Income Partners I) and intends to reduce its stake to 10%. Investor interest for GLP US Income Partners I is strong and GLP remains confident of completing the fund syndication by Aug 2015. Looking ahead, value creation is expected to accelerate as GLP ramps up its development pace. It has already commenced US$1.7 bln of new developments across China, Japan and Brazil YTD. In FY16, GLP expects to start US$3.4 bln of developments (GLP share: US$1.6 bln), up 30% yoy. GLP remains well capitalized with net cash of almost US$400 mln as of end-Dec 2014 and net debt to assets stands at 4% on a look through basis. Backed by a robust balance sheet, we think GLP is well positioned to capitalize on any M&As opportunities and selectively expand its footprint.

2900 2800 02/14 03/14 04/14 05/14 06/14 07/14 08/14 09/14 10/14 11/14 12/14 01/15

Source: Bloomberg

While headline profit numbers appear disappointing with 3Q’15 profit down 36% yoy, we would look to Buy on further weakness as the decline is due to sale of its properties in Japan and valuation remains undemanding at slightly above 1x book. Our preferred entry price is closer to $2.40.

Singapore Research Team Tel: 6533 0595 Email: [email protected] Please see research disclaimer on last page

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OTHER HIGHLIGHTS Great Eastern’s ($24.16, down 4 cents) operating profit from its insurance business for 4Q’14 and FY’14 was S$156mln and S$591mln respectively, 15% and 6% higher yoy, underpinned by a growing in-force business, particularly from the investment-linked fund in Malaysia. In Singapore, the agency channel continued to deliver stable performance in 4Q’14. The bancassurance channel saw a recovery in sales from earlier quarters, though overall sales for 4Q’14 was still lower yoy. For 4Q’14, the group recorded nonoperating profit growth of 73% to S$25.5mln reflecting higher unrealised mark-to-market gains. For FY’14, non-operating profit was S$145.2 million, reversing from last year’s loss of $10mln. Net profit for 4Q’14 and FY’14 rose 25% and 30% yoy to S$208mln and S$879mln respectively, reflecting higher unrealised mark-tomarket gains from favourable financial market conditions and growth in operating profit from the insurance business. The capital adequacy ratios of the group’s insurance subsidiaries in both Singapore and Malaysia remained well above the minimum regulatory ratios of 120% and 130% respectively, reflecting the strong capital position of the Group. The Group’s Embedded Value, an estimate of the longterm economic value of a life insurance company for the existing blocks of business, rose significantly by 13% to S$10.4 bln in FY’14, driven by an increase in the value of adjusted shareholders’ fund from strong investment performance as well as growth in the value of the in-force business. Final dividend was raised from 27 cents last year to 40 cents this year but last year’s special dividend of 27 cents was reduced to 5 cents this year. Including the interim dividend of 10 cents, full year payout of 55 cents (down from 64 cents last year) translates to a dividend yield of 2.28% (at $24.16). The dividend yield is probably decent enough for shareholders to HOLD on for another privatization attempt by OCBC (owns 87.17% of the company), given their failed attempt (2x) in the past 10 years. (Trailing PE is 13x while price to book is 2x). Technics Oil and Gas ($0.695, unchanged) said that it has secured contracts worth of S$6 mln to supply Process and Rotating Equipment to Malaysia customers. We note that the award of these contracts comes rapidly on the back of a recent order win by the group. Only a day earlier, its 40.21% associate company, Norr Offshore Group (NOG) just clinched GRE contracts worth of S$7.2 mln to supply, fabricate, test, install and commission for SW and Ballast systems for a Singapore customer. These contracts are expected to have positive impact on the EPS for the FY15. Southern Packaging ($0.138, unchanged) issued a profit warning and that it expects to report a net loss for its FY14 financials. This is primarily attributed to the share of loss arising from an associated company, and the impairment in the carrying value of the investment in the said associated company and the lower demand for packaging materials in the PRC coupled with higher operating costs.

CFM Hldgs ($0.08, down 1 cent) issued a profit guidance and that it expects to report a net loss for its 1H15 results. This is mainly due to the global decrease in demand from some of the company’s key customers in the metal stamping segment, and some of the metal stamping’s customers’ products having reached its end of product life. More details will be disclosed when the company announces its 1H15 financials on or before 14-Feb-15. Multi-Chem Ltd ($0.146, unchanged) saw 4Q14 revenue dip 3% to S$79.1mln while net profit increased 65% to S$3.1mln. The decline in sales was mainly due to lower turnover from the IT division, although factors such as better overall gross margins and a decrease in allowance for inventory obsolescence had helped lift bottomline. For FY14, revenue was up 11% to S$291.7mln while net profit surged to S$4.8mln from S$0.1mln in FY13. A final dividend of S$0.0055 was declared (4Q13: S$0.0055). Going forward, the company opined that the near term outlook in the IT business is dependent on events such as those political or economic in nature and such events could affect business in certain markets. However, IT is still a critical requirement in businesses and security will continue to remain an integral part of the IT infrastructure. This should augur well for the company as more efforts are put into growing the IT business. At $0.146, market cap is $52.6mln, P/E is 10.6x, P/B is 0.6x, dividend yield is 5.6% and price-to-sales is 0.2x. CSC Hldgs ($0.048, down 0.1 cent) saw 3Q15 revenue dip 1.4% to S$116.6mln although it registered a net loss of S$6.1mln as compared to net profit of S$0.8mln in 3Q14. Due to an unfavourable arbitration award pursuant to an arbitration proceeding against a third party where the company had to make a S$3.2mln provision and a decrease in other income, the company had thus registered losses for the period. For 9M15, turnover decreased 16.8% to S$312.9mln while it registered a net loss of S$7.7mln as compared to net profit of S$2.4mln in 9M14. No interim dividend was declared (3Q14: nil). Going forward, the company is of the view that while public residential projects will moderate from a ramp-up in previous years, a sustained pipeline of institutional and civil engineering works, coupled with an increase in industrial projects will lend support going forward. However, construction demand from the private sector is expected to ease as developers remain cautious in a tepid residential market environment and uncertainties in the global economic conditions. As at 04-Feb-15, the company’s order book is approximately S$260mln (05-Nov-14: S$280mln). The bulk of these contracts is expected to be completed within the next six to nine months.

FSSTI STOCK SELECTION HIGHEST CONSENSUS FY14E DIV YIELD (%)

LOWEST TRAILING P/B (X)

1 HUTCHISON PORT-U

7.17

1 GOLDEN AGRI-RESO

0.46

2 ASCENDAS REAL ES

6.20

2 HONGKONG LAND

0.68

3 SPH

5.20

3 HUTCHISON PORT-U

0.76

4 CAPITAMALL TRUST

5.18

4 JARDINE STRATEGIC

0.93

5 KEPPEL CORP

5.05

5 CAPITALAND LTD

0.95

LOWEST CONSENSUS FY14 P/E (X)

LOWEST TRAILING EV/EBITDA (X)

1 NOBLE GROUP LTD

8.39

1 SIA

5.63

2 SEMBCORP INDUSTRIES

9.34

2 JARDINE C&C

7.57 8.66

3 KEPPEL CORP

10.06

3 SEMBCORP MARINE

4 OLAM INTERNATIONAL

10.52

4 COMFORTDELGRO

8.75

5 OCBC BANK

10.75

5 SEMBCORP INDUSTRIES

9.24

Source: Bloomberg Estimates (FSSTI Universe)

Please see research disclaimer on last page

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29 JANUARY - 05 FEBRUARY

SHARE TRANSACTIONS

Company

Buy

Sell

Transacted Price* ($)

Market Price ($)

New Balance

Stake (%)

100,000 19,000,000

-

0.675 0.225

-

100,000 71,060,000

0.08 17.50

-

215,700

ND

1.91

708,815,200

8.67

Party

ACQUISITIONS Cambridge Industrial Declout

Chua Yong Hai Wong Poh Leng

DISPOSALS IHH Healthcare

EPF

* ND: Not Disclosed

SHARE BUYBACK

Company

ST Engineering

Please see research disclaimer on last page

No. of shares

Price ($)

Cumulative Purchases

Of Maximum (%)

302,100

3.42

13,280,300

4.3

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3

DIVIDENDS (LIST IS NOT EXHAUSTIVE) Company

Amount

M1 Keppel Land Keppel Corp Keppel T&T

11.9¢ final 14¢ final 36¢ final 3.5¢ final / 11.5¢ special

Please see research disclaimer on last page

Last Day First Day Cum-Dividend Ex-Dividend 16 Apr 20 Apr 21 Apr 21 Apr

17 Apr 21 Apr 22 Apr 22 Apr

Date Payable 30 Apr 07 May 06 May 05 May

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WHAT’S AHEAD

FEBRUARY 2015 Sun

Mon

Tue

1

Wed

2

3

Thu 4

Fri 5

Sat 7

6

AscendasHospitalityTrust Great Eastern Hldgs SIA HPH Trust Yoma Strategic

8

9

10

SBS Transit DBS Fragrance Group

Ellipsiz Meghmani Parkson Retail Asia VICOM

15

22

12

ComfortDelgro Croesus Retail Trust FEO Hospitality Asset KSH Holdings OCBC Saizen Reit UOI

Amtek Engineering ASL Marine Biosensors China Aviation Oil Chosen Holdings IFast Corporation Lippo Malls Indonesia SembCorp Marine SingTel Starburst Holdings Wilmar Intl Yamada Green

19

20

21

26

27

28

Hotel Royal Mewah International UOL Group

Ho Bee Land IndofoodAgriResources IREIT Global Karin Technology Otto Marine Vard Holdings

16

17

18

ARAAsset Management Challenger Technologies City Developments Cosco Corp Ezion Holdings Rowsley

SembCorp Industries

Aztech Group MacquarieIntlInfrastructure

23

24

25

Asian Pay TV Genting Singapore IFS Capital

Please see research disclaimer on last page

14

11

HTL International Sheng Siong Group Starhub Ltd

13

Hi-P International NOL Olam Perennial Resl Estate Tat Hong UOB

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RESEARCH DISCLAIMER This report is intended for clients of Lim & Tan Securities Pte Ltd [herein after termed as LTS] only and no part of this document may be – i.

Copied, photocopied, duplicated, stored or reproduced in any form by any means or

ii. Re-distributed or disseminated, directly or indirectly, to any other person in whole or in part, for any purpose without the prior consent of LTS. This research report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult your independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information, tools and material presented herein this report are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject LTS to any registration or licensing requirement within such jurisdiction. The information and opinions presented in this research report have been obtained or derived from sources believed by LTS to be reliable. Their accuracy, completeness or correctness is, however, not guaranteed. Opinions and views expressed in this report are subject to change without notice, and no part of this publication is to be construed as an offer, or solicitation of an offer to buy or sell securities, futures, options or other financial instruments or to provide investment advice or services. Therefore, LTS accepts no liability for loss arising from the use of the material presented in this report where permitted by law and/or regulation. LTS may have issued other reports that are inconsistent with the assumptions, views and analytical methods of the analysts who prepared them. LTS, its directors, its connected persons and employees may, from time to time, own or have positions in any of the securities mentioned or referred to in this report or any securities related thereto and may from time to time add to or dispose of or may be materially interested in any such securities. LTS’s research analysts are primarily responsible for the content of this report, in part or in whole, and certifies that the views about the companies expressed in this report accurately reflect his personal views. LTS prohibits the research analysts who prepares this report from receiving any compensation (excluding salary and bonuses) or other incentives and benefits receivable in respect of this report or for providing specific recommendation for, or in view of a particular company or companies mentioned in this report. LTS-SPECIFIC / REGULATORY DISCLOSURE 1. LTS does not have a proprietary position in the companies as recommended in this report as at the close of 05/02/15. 2. The research analysts do have an interest in OCBC as recommended in this report as at the close of 05/02/15.

*

Includes direct or indirect ownership of securities or Futures Contracts (excluding the amount of securities or Futures Contracts owned), directorships or trustee positions.

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