OCBC Report

KEY IDEA CapitaLand Limited: Deepening presence in China CapitaLand (CAPL) announced that it has acquired a 60% interest in two adjacent prime residential sites in Chengdu, China for RMB752m (S$155m). The project will yield ~4,600 residential units and the first phase is expected to launch by end 2014. The group has already successfully developed and launched Raffles City Chengdu, The Loft and The Botanica in the city, and we like CAPL’s strategy of deepening its presence in key sub-markets in which they have experience and expertise. The Chinese credit markets are experiencing increasing stress as authorities opt to let weaker companies go into financial default, and we believe this could throw up acquisition opportunities for CAPL as its Chinese peers grapple with tightening credit conditions and rising cost of debt. We note that the group enjoys a strong balance sheet with an estimated S$6.9b in cash and net gearing of 29%, after its recent AustraLand divestment. Maintain BUY on CAPL. Pending completion of these acquisitions, we opt to keep our fair value unchanged at S$3.50. (Eli Lee) MORE REPORTS Nam Cheong: Secures US$43.1m contracts for two vessel sales Nam Cheong Limited announced this morning that it has clinched contracts worth a total of US$43.1m for the sale of one unit of Anchor Handling Towing Supply (AHTS) vessel (5,150 BHP) and one unit of Platform Supply Vessel (PSV) of 5,000 DWT under its built-to-stock model. Deliveries for both vessels are scheduled in 2014. This lifts Nam Cheong’s YTD contract wins to seven vessels amounting to US$113.1m. The AHTS was sold to a new customer, Kayfour Development Corporation Sdn Bhd, while the PSV was sold to a repeat customer E.A. Temile and Sons Development Company of Nigeria Limited. According to Nam Cheong, its order book stands at ~MYR1.4b following these order wins. We maintain our BUY rating and S$0.42 fair value on Nam Cheong. (Wong Teck Ching Andy)

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NEWS HEADLINES - The US stock market pared most of its gains Fri after an early morning rally following generally positive consumer spending data petered out by mid-afternoon. - The stronger SGD was a significant contributing factor to Singapore being ranked first in living costs for expatriates, according to a study by the Asia Competitiveness Institute. - Olam International said that Tata Chemicals will no longer be taking a 25.1% equity stake in its fertiliser project in Gabon. - Singapore Airlines has raised its stake in Virgin Australia Holdings Ltd to 22.17% from 19.83% for a total consideration of A$30.4m. - The share price of Asia Fashion Holdings fell about 15% on news that a subsidiary was the subject of arbitration proceedings for alleged non-fulfilment of obligations in a compensation settlement. - Interra Resources is proposing a warrant issue to reward its shareholders and raise funds for the company. - Neo Group doubled its FY14 net profit to hit a record high of S$6.4m, buoyed by robust revenue. - Tianjin Zhong Xin Pharmaceutical Group Corporation Ltd registered a 12% fall in net profit from 399.9m yuan (S$69.1m) to 352.3m yuan for FY13.