ARA Asset Management - An attractive proxy for
REITs; upgrade to BUY, TP S$1.89
Stocks start the Friday session softer on the back of the
overnight loss on Wall Street as concerns about the
consequence of the budget impasse and a possible US
debt default grew. The US Treasury issued a grim report
on the consequent of a default that could last for more
than a generation. We adopt a contrarian view on the
latest alarm raised by the US Treasury – putting pressure
on the lawmakers increases the likelihood of a last minute
resolution in time to avoid default. While near-term stress
lines are appearing, we maintain our view that STI should
find support at c.3100.
We are upgrading ARA Asset Management to BUY, TP
S$1.89 (Prev S$1.78). Backed by a strong cashflow
generating and scalable business that is growing steadily,
we believe that ARA offers an attractive investment
proposition at current levels. ARA is an attractive proxy for
REITs, without the interest rate risk. Fees derived from its
REITs are resilient, transparent and growing. The group
derives close to 66-67% of its revenues from its six
managed REITs across major Asian markets.
M1 has been slapped with the industry's largest fine on
record in the country's history - $1.5m - for the disruption
of its 2G and 3G mobile phone services in January. These
2G and 3G mobile service disruptions lasted about 71
hours and 63 hours respectively in mid- January, affecting
some 250,000 M1 customers.
Blumont Group has reached agreement on the
commercial terms of a proposed takeover bid for the
entire stake of a foreign-listed coal mining company for
up to approximately S$145.9m. The consideration is to be
satisfied by issue of up to approximately 72.2m new
shares at an issue price of S$2.02 per share.
Technics Oil & Gas is expected to report an operating net
loss for Q4 FY2013 and for FY2013.
US Indices Last Close Pts Chg % Chg
Dow Jones 14,996.5 (136.7) (0.9)
S&P 1,678.7 (15.2) (0.9)
NASDAQ 3,774.3 (40.7) (1.1)
Regional Indices
ST Index 3,144.8 (7.8) (0.2)
ST Small Cap 568.9 (0.8) (0.1)
Hang Seng 23,214.4 229.9 1.0
HSCEI 10,514.6 181.0 1.8
HSCCI 4,479.8 77.5 1.8
KLCI 1,771.4 1.0 0.1
SET 1,429.2 20.2 1.4
JCI 4,418.6 31.0 0.7
PCOMP 6,387.7 25.4 0.4
KOSPI 2,002.8 3.3 0.2
TWSE 8,359.0 142.5 1.7
Nikkei 14,157.3 (13.2) (0.1)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 586
Total Daily Vol (m shrs) 3,413
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
3 Oct
Target Price
($)
ST Engineering Buy 4.150 4.80
ComfortDelgro Buy 1.940 2.19
OCBC Bank Buy 10.220 12.40
Singapore Airlines Buy 10.260 11.40
Frasers Centrepoint Trust Buy 1.840 2.07
Stock Picks – Small /Mid Cap
Rec’n Price ($)
3 Oct
Target Price
($)
Ezion Holdings Buy 2.270 3.10
Goodpack Buy 1.730 2.00
CSE Global Buy 0.880 1.07
Mapletree Commercial Trust Buy 1.220 1.35
CDL Hospitality Trust Buy 1.645 1.80
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
The Financial Supervisory Services of Korea (FSS) has imposed
a fine of KWR2 billion (approximately S$2.3m) on China
Gaoxian Fibre Holdings. In addition, the FSS has imposed
fines of KRW50 million (approximately S$58,100) and
KRW16 million (approximately S$18,600) respectively on Mr
Cao Xiangbin and Mr Raymond Wong, who are, respectively,
the former Executive Chairman and Chief Financial Officer of
the Company as at the time of the Korean Listing.
Furthermore, the FSS has referred the company and Mr Cao
Xiangbin to the Prosecution in Korea.
Activity in China's services sector expanded at the fastest
pace in six months in September as demand grew. The
official purchasing managers' index (PMI) for the nonmanufacturing
sector rose to 55.4 in September - the highest
reading since March - from 53.9 in August. The sub-index
measuring new orders, from both home and abroad, rose to
53.4 in September from 50.9 in August, while input prices
and services charges eased. The services industry, which has
so far weathered the global slowdown much better than the
factory sector, is an increasingly important pillar in China's
economy, especially as the government seeks to expand
domestic consumption to drive growth. Services accounted
for about 45% of the economy in 2012 and is the biggest
employer in China.
US stocks fell as concerns grew that the budget impasse and
even greater consequence should the US default on its debt,
leading to a recession or worse. A weaker-than-expected
September ISM non-manufacturing index (actual 54.4,
consensus 57) also dampened sentiment. The US Treasury
said measures to avoid exceeding the USD16.7tril ceiling will
be exhausted by Oct 17 and warned that a default caused by
a failure to raise the cap could have catastrophic
consequences that last decades. “Not only might economic
consequences of default are profound, those consequences
that include high interest rates, reduced investment, higher
debt payments & slow economic growth could last for more
than a generation”, the Treasury said in the report. The USD
dipped against major currencies while the 10-year treasury
yield stayed at 2.61%.
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