Tuesday, April 8, 2014

OCBC Report 8 Apr 14

KEY IDEA

City Developments Limited: Housing bear market gaining momentum

We judge CityDev’s share price to be fairly rich here, given a deteriorating outlook for its core development business, and opt to take profit at this juncture. Downgrade to SELL with a lower fair value estimate of S$8.72 (30% RNAV disc.), versus S$9.17 previously, as we incorporate softer residential ASPs and lower valuations for listed holdings into our model. From latest data-points and channel checks, we anticipate increasing headwinds in the domestic residential space as both primary and rental markets continue to suffer from weakening supply-demand dynamics. 1Q14 URA flash estimates for the private residential property index showed a 1.3% decline, indicating downward price momentum after a 0.9% dip in 4Q13. We also note the weakness was fairly broad-based, with prices in the Outside Central Region (mass-market), Rest of Central Region (mid-tier) and Core Central Region (high-end) falling 0.3%, 2.8% and 1.3% respectively. In addition, we expect pressure on rental rates ahead as the physical market heads deeper into an over-supply situation. (Eli Lee)

MORE REPORTS


Midas Holdings: Clinches high-speed train car orders worth CNY318m

Midas announced last evening that it has secured contracts for high-speed train car body components from CNR Tangshan Railway Vehicle Co. Ltd (subsidiary of China CNR) worth an aggregate of CNY318m. This is part of China Railway Corporation’s (CRC) second round of high-speed train car tender. Midas’ YTD order wins has now reached CNY389.9m. Under the terms of the contract, Midas will supply aluminium alloy extrusion profiles and certain fabricated parts for high-speed trains which will operate at speeds of up to 350 km/h. This is Midas’ largest single announced contract win since Jan 2010, and this set of orders will be delivered fully in 2014, in-line with our expectations. We believe Midas is still working with another of China CNR’s subsidiaries CNR Changchun Railway Vehicles Co. for more high-speed train car contracts under CRC’s second round of tender, and hence has a possibility of exceeding our CNY325-380m expectation. As highlighted in our recent update on Midas (refer to our 4 Apr 2014 report), we expect the group to be a key beneficiary of China’s stimulus measures to the railway sector, and see the possibility of CRC opening its third round of high-speed train car tenders in 2H14. We expect the market to react positively to this latest development; maintain BUYand S$0.66 fair value estimate on Midas. (Wong Teck Ching Andy)

For more information on the above, visit
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NEWS HEADLINES


- The US stock market fell sharply on Mon as heavy selling in high-growth stocks, which began on Fri, continued to spill over the broader market.

- Shares in JK Tech Holdings shot up yesterday on news of a proposed diversification that will see Ezion Holdings taking a minimum 29.81% and a possible eventual maximum 64.82% stake in the firm.

- Pacific Radiance is strengthening its foothold in the Australian oil and gas sector through a new joint venture.

- Companies and banks who want to hedge their exposure between the Thai baht and Malaysian ringgit are now able to do so directly at the SGX, instead of going through their banks.

- Global Logistic Properties has signed a new build-to-suit agreement with Trinet Logistics Company in Japan.

- Polaris announced yesterday that it has exercised conditional options to buy four properties worth about S$3.47m in total for expansion.

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