OCBC Report 11 Mar 14

KEY IDEA Yoma Strategic Holdings: An impressive series of key moves Yesterday, Yoma reported a series of key moves in expanding its businesses in real estate, education, agriculture and logistics. First, it signed a definitive shareholders agreement with Hongkong and Shanghai Hotels to redevelop the former Myanmar Railway Company headquarters into The Peninsula Yangon hotel. In addition, Yoma will also take an 80% stake in developing two sites near FMI City into a project with 90 residential units and 19.9k sq ft of commercial leasing space. Yoma also announced plans to co-develop educational facilities with Harrows International Management Services and Dulwich College International in Pun Hlaing Golf Estate and Star City, respectively. Finally, the group also formed a proposed partnership (YALH) with IFC to invest in agriculture and logistics businesses. YALH has entered into agreements with ED&F Man Holdings Ltd, PMM Partners Ltd, and Kokubu & Co. Ltd., separately, to invest in coffee planting in Ayeyarwaddy, supplying UHT dairy products, and establishing a cold chain business in Myanmar, respectively. Maintain BUY with a higher fair value estimate of S$1.00, versus S$0.97 previously, as we update our model for accretion from the FMI City Gate sites and marginally firmer real estate prices. (Eli Lee) MORE REPORTS Hyflux: Divestments good but still pricey Hyflux Ltd just announced that it will be divesting its consumer JVs for a total of US$50.1m; Hyflux will book an excess of sale proceeds over net book value of S$53.9m, which it intends to use for strategic investments and working capital purposes. We agree with management’s view that these operations are non-core to its strategy and we see the recycling of capital as key to its ability to fund its future projects. Although Hyflux expects to realize S$54m gain from the divestment, we see it more as a one-off item. Instead, we are bumping up our FY14 estimates to allow for more contract wins this year, which will improve our fair value from S$0.84 to S$1.00. But as current valuations are still pricey, we maintain SELL. (Carey Wong) Vard Holdings: LOI for large Offshore Subsea Construction Vessel Vard Holdings Limited (VARD) announced that it has entered into a Letter of Intent (LOI) with Solstad Offshore for the design and construction of a large Offshore Subsea Construction Vessel (OSCV). Although the contract value was not disclosed, the announcement mentioned that this would be VARD’s largest single vessel order in its history. We estimate that this OSCV order could be worth at least NOK1.5b. This vessel will be VARD’s internal design, and will also be the largest ever constructed by VARD. Delivery is scheduled for 2Q16. YTD, we estimate that VARD’s order wins have totalled ~NOK3.85b. Maintain our HOLD rating and S$0.84 fair value estimate on VARD. (Wong Teck Ching Andy)

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NEWS HEADLINES - US stocks ended Tue’s choppy session lower, as investors appeared to take a pause in a day light on economic data releases. - Politics and adverse weather are pushing food prices up, creating potential for inflationary pressures in South-east Asia. - United Overseas Australia has joined the growing list of global companies venturing into the emerging Myanmar market. - Creative Technology's wholly owned subsidiary, ZiiLabs, has sued tech giants Samsung and Apple for alleged patent infringement. - Stamford Tyres' 3QFY14 profit sank 62.7% YoY from a restated S$2.2m to S$838,000.