Today’s Focus
• S-REIT - Organic growth potential to differentiate the
winners. BUY Suntec, CDREIT, CRCT, FCT and FCOT
STI starts the year 2014 at 3167. This is some 61pts below
the 13.9x (Ave) FY14F PE level at 3228 that is viewed as a
major short-term resistance. Given that the index had risen
more than 100pts from a low of 3050 in mid-December, we
expect the rate of climb in the past 2 weeks to ease off in the
near-term as it approaches the 3200 level or slightly lower.
We see room for the STI to head towards 3350 in the months
ahead but Rome wasn’t built in a day. Near-term support is at
3130, which coincides with the 15-day exponential moving
average, firmer at 3080.
Singapore GDP grew 3.7% in 2013, within the official
forecast of 3.5-4%. 4Q GDP fell 2.7% (q-o-q saar), below
consensus expectation for a 1.3% decline. The government
official forecast for 2014 GDP growth remains at 2-4%. In his
New Year message, PM Lee said he is confident that
Singapore will do well provided nothing untoward happens in
Asia. He added that Singapore is investing in her future and
developing new capabilities for tomorrow's economy, like 3D
printing, data analytics and consumer insights research. Still,
he cautioned that while the US and European economies are
stabilising and Asian prospects stay positive, there are
problems and tensions, especially in North-east Asia. Disputes
between China, Japan and South Korea over historical issues
and ownership of various islands have sharpened. The
stability of the Korean peninsula is a serious worry.
Singapore’s interest in new technologies such as 3D printing
could underpin interest in companies such as Venture Corp.
According to a Gartner press release published in October last
year, combined end-user spending on 3DPs will reach
US$412mil in 2013, up 43% from spending of US$288mil in
2012. Enterprise spending will total more than US$325mil in
2013, while the consumer segment will reach nearly
US$87mil. In 2014, spending will increase 62%, reaching
US$669mil, with enterprise spending of US$536mil and
consumer spending of US$133mil. Venture Corp is expected
to declare a 50cts dividend payout when it announces its FY
earnings on February. Our current recommendation is Buy
(TP: $8.40)
US Indices Last Close Pts Chg % Chg
Dow Jones 16,576.7 72.4 0.4
S&P 1,848.4 7.3 0.4
NASDAQ 4,176.6 22.4 0.5
Regional Indices
ST Index 3,167.4 14.1 0.4
ST Small Cap 542.1 1.9 0.3
Hang Seng 23,306.4 61.5 0.3
HSCEI 10,816.1 45.4 0.4
HSCCI 4,553.6 28.4 0.6
KLCI 1,867.0 (5.6) (0.3)
SET 1,298.7 (9.8) (0.7)
JCI 4,274.2 61.2 1.5
PCOMP 5,889.8 11.5 0.2
KOSPI 2,011.3 9.1 0.5
TWSE 8,611.5 (11.9) (0.1)
Nikkei 16,291.3 112.4 0.7
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 578
Total Daily Vol (m shrs) 3,306
12m ST Index High 3,454
12m ST Index Low 3,004
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
31 Dec
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.675 0.82
Keppel Corp Buy 11.190 12.90
OCBC Buy 10.200 12.40
Yangzijiang Buy 1.185 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
31 Dec
Target Price
($)
Ezion Holdings Buy 2.220 3.30
China Merchants Buy 0.925 1.20
CSE Global Buy 0.765 1.11
Nam Cheong Buy 0.315 0.42
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
We expect S-REITs to face rising cost of capital. This will mean
that investors of SREITs will likely require higher returns to
compensate for thinning spreads against the 10- year bonds in
2014. However, with S-REITs trading at a yield spread of 4.0%
(vs 3.5% historical average), we believe that much of this risk
has been priced in. With shorter-term interest rates expected
to remain low, S-REITs should only see marginal changes in
their refinancing activities, with limited impact to distributions.
We prefer S-REITs with organic growth due to fewer
acquisition opportunities. We project distributions to grow by
5% in FY15F, driven largely from organic sources, supported
by completing development activities. Our picks remain S-REITs
with superior growth or with exposure in sectors leveraged to
economic growth, such as CDL HT (TP: S$1.84), Suntec REIT
(TP: S$1.80), CapitaRetail China Trust (TP: S$1.60), Frasers
Centrepoint Trust (TP: S$2.14) and Frasers Commercial Trust
(TP: S$1.46).
Sembcorp Marine’s subsidiary PPL Shipyard has secured a
repeat order to build a third Pacific Class 400 jack-up rig worth
US$211.5m from Perisai, a wholly-owned subsidiary of Perisai
Petroleum. The rig is scheduled for delivery in the third quarter
of 2016.
GSH Corporation and TYJ Group - the investment vehicle of
"popiah king" Sam Goi - are jointly investing about RM700m
(S$269.7m) for a 77.5% stake in The Sutera Harbour Group
Sdn Bhd. After the acquisition, The Sutera Harbour Group will
hold 100% of Sutera Harbour Resorts, which operates two
five-star hotels in Kota Kinabalu, Malaysia, as well as the 104-
berth Sutera Harbour Marina and Country Club which has a
27-hole championship golf course.
In property news, Singapore’s private residential property
index of 214.5 as at 4Q13 was lower than 3Q’s 216.3, -0.8%
Q-o-Q.
The revived interest in commercial and industrial en bloc sales
here is likely to persist this year, say consultants, as preference
for residential deals starts to dwindle, dampened by the
various cooling measures last year which were largely aimed at
the latter segment.
China’s December PMI of 51 was below consensus for 51.2
and lower than November’s reading of 51.4. Meanwhile, Xi
Jinping, delivering his New Year address, said the country must
press ahead with reforms in 2014. A key task will be
overseeing the reforms spelled out at the Communist Party
Central Committee's 3rd Plenum in November last year. These
include loosening the one-child policy, increasing property
rights for farmers and encouraging private investment in more
industries. The issue of local government debt will also be
tackled.
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