OCBC Report

KEY IDEA Singapore Airlines: Tata-SIA JV closer to take-off The Indian civil aviation ministry has cleared Tata SIA Airlines Limited (Tata SIA), the India JV between SIA and Tata Sons. The final hurdle is approval from Directorate General of Civil Aviation (DGCA). We think Tata SIA will be crucial in growing SIA’s market share in India’s international flight, which is estimated by CAPA to be 4% in FY13. Tata SIA can value-add to SIA on two fronts: 1) serving India domestically from its home market, and 2) using India as a base to serve the region. However, we are cautious of regulatory hurdles given two previous failed collaboration attempts. Additionally, there are issues such as frequency of flights that will determine the JV’s success. Until there is more colour on the operation permit, we maintain our HOLD call with S$9.50 fair value. (Yap Kim Leng) MORE REPORTS Ezion Holdings: Proposed subscription of shares in JK Tech Ezion Holdings Limited announced that it has entered into a subscription agreement with JK Tech Holdings for the purchase of 42m ordinary shares in the capital of JK Tech at an issue price of S$0.09/share (40% discount to its last closing price), which implies a total investment cost of S$3.78m. This would be financed by the issuance of 1.85m new Ezion shares at an issue price of S$2.0445 (4.5% discount to its last closing price). Ezion has also entered into an option agreement with JK Tech for 260m share options, with each option carrying the right to subscribe to one new ordinary share in the capital of JK Tech at an exercise price of S$0.09/option. Ezion intends to introduce opportunities in the business of exploration, exploitation and production of oil and gas to JK Tech, which wishes to diversify into this segment. Hence, this is viewed as a long-term strategic investment and partnership by Ezion. The new Ezion shares to be issued represent only ~0.15% of its total enlarged issue share capital; and on a pro forma basis, this development would only marginally raise its FY13 NTA/share and EPS by 0.2% and 0.1%, respectively. Hence, we maintain our BUY rating and S$2.57 fair value estimate on Ezion for now. (Low Pei Han and Andy Wong)

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NEWS HEADLINES - Momentum shares sold off sharply in the US for a second straight day, giving the Nasdaq its worst day since Feb and leaving investors anxious about how much further they may fall. - Market consensus is that MAS will keep the SGD appreciating for another six months when it reviews its policy in a week's time to guard against wages-led price hikes. - Buying by directors rebounded while selling fell last week based on filings on SGX from Mar to Apr. - XMH Holdings announced that it has secured two new contracts worth US$3.6m. - Surbana International Consultants has set up a branch office in Yangon to meet growing demand for its township planning services in Myanmar. - After underperforming in 2013, commodity prices are primed to pick up in 2014 with a number of drivers converging to push commodity prices higher. - Penny stock investigations widen as more than 10 top execs from seven firms and several subsidiaries are being probed for possible breaches of the Securities and Futures Act. - Indonesian curbs on tin exports are offering a prop to Chinese producers facing slumping home demand, underpinning global prices and boosting opportunity to ramp up overseas sales.