Thursday, January 9, 2014

OCBC Report 10 Jan 14

KEY IDEA

SPH REIT: Steady start to FY14


Summary:
SPH REIT reported DPU of 1.86 S cents for the period from 24 Jul (listing date) to 30 Nov 2013. This is largely consistent with our projection of 1.84 S cents. The better performance was mainly attributable to higher rental rates at Paragon and stable income from Clementi Mall. In addition, both malls retained their 100% committed occupancy track record. SPH REIT’s keen eye for capital management has also enabled it to establish a well-staggered debt profile and long weighted average term to maturity of 4.8 years. Moreover, ~54.7% of its interest rate exposure has been fixed, which will alleviate any negative impact of rising rates to its DPU. We continue to like SPH REIT for its unique exposure to the upscale and suburban retail market and healthcare services sector. However, as the stock appears to be fairly priced relative to our fair value of S$0.99, we maintain our HOLD rating. (Kevin Tan)


MORE REPORTS


TEE International: Climbing back to normalcy - 2Q14 results up 74% QoQ

Summary:
As anticipated, TEE’s PATMI showed a strong 73.8% QoQ increase to S$1.6m in 2Q14 from S$0.9m in 1Q14. That cumulates to a S$2.5m profit for 1H14 – down 52.4% YoY - but we continue to forecast earnings to show YoY growth in a back-loaded FY14 as stronger profit contributions from Tee Land (its property development subsidiary) and engineering projects would kick in over 2H14. The group announced that Tee Land has recently acquired for S$45.2m the Long House at Upper Thomson Road which would be redeveloped into a mixed residential and commercial project. The land cost translates to S$890 psf GFA which we view to be fairly decent in view of estimated overall breakeven average selling prices of around S$1.4 – S$1.5k psf. Management has declared an interim dividend but will announce the exact details at a later date. On an overall basis, we judge 2Q14 results to be mostly in line. We would speak further with management about this set of results and, in the meantime, maintain BUY with a fair value estimate of S$0.35. (Eli Lee)


Ezra Holdings: 1QFY14 results within expectations

Summary:
Ezra Holdings reported its 1QFY14 results this morning, with revenue growing 21.9% YoY to US$339.8m (25% of our full-year estimate) but PATMI declined 6.1% to US$6.3m. However, if we strip out exceptional items such as forex losses and a gain on dilution of interest in an associated company, we estimate core PATMI to come in at US$6.7m, or a 57.2% YoY jump. This formed ~20% of our FY14 core PATMI forecast, which we view as in line with our expectations. Ezra’s Subsea Services division was its main revenue driver for 1QFY14, with a US$59.5m revenue increase thanks to more projects undertaken, additional variation orders and contribution from two new subsea construction vessels (delivered in 4QFY13). This division also managed to record its second consecutive quarter of operational profit. We will provide more details after the conference call with management. For now, we have a SELL rating and S$0.99 fair value estimate on Ezra. (Low Pei Han and Andy Wong)

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


NEWS HEADLINES


- The S&P 500 index eked out a marginal gain on Thu, while the Dow Jones Industrial Average dropped, weighed down by losses for Verizon Communications Inc. and AT&T Inc.


- Singapore construction sector looks set for positive performance in 2014, though its impact is likely to be moderated, according to the Building and Construction Authority.


- The median price for a Housing and Development Board (HDB) flat has dipped for the first time in four years, according to data from the Singapore Real Estate Exchange.


- CCM Group announced a board and management restructuring, issued a profit warning for FY13, and said it was diversifying into property development in Australia.

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