OCBC Report 19 May 14

KEY IDEA Singapore Post: Still a good place to park your funds Singapore Post (SingPost) reported a 4.8% rise in net profit to S$143.1m in FY14. Excluding one-offs, underlying net profit grew 2.9% to S$145.0m in FY14, 1.8% higher than our estimate. Though the group’s business transformation will still take time (and perhaps more acquisitions), its initiatives are starting to yield results. We switch our valuation to the free cash flows from equity method to capture growth from the e-commerce business. As such, our fair value rises from S$1.32 to S$1.42. Meanwhile, SingPost’s stock has also been buoyed by investors seeking to park their funds in an environment awash with liquidity. Hence we believe that investors may continue to seek refuge in the stock as long as the dividend yield remains decent. Indeed at current price, the forecast dividend yield is decent at 4.4%, and may be attractive to yield seekers. However, given the limited upside potential, maintain HOLD. (Low Pei Han)

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NEWS HEADLINES - The US stock market closed higher Fri after an abrupt late-day reversal. Analysts attributed such a move to ‘buying the dip’ strategy that has been the theme in the past few months. - Singapore's non-oil domestic exports crept up 0.9% from a year ago in Apr, defying the market's prediction of a 3.4% decline. - Singapore's consumer inflation rate probably was at its highest level in five months in Apr, a Reuters poll showed, due to higher private transport costs against a low base a year ago. - CapitaLand has sweetened its delisting offer for CapitaMalls Asia with a higher offer price of S$2.35 per share, up from the initial offer price of S$2.22. - Wilmar International and First Pacific Company announced that they are proceeding with due diligence after Goodman Fielder board of directors recommended accepting the takeover bid. - Shares of STATS ChipPAC shot up on heavy volume on news that a third party has expressed interest to acquire the Temasek-linked semiconductor packaging and testing services company. - Olam International will be investing US$61m to establish a new cocoa processing facility in Indonesia. - Chemoil Energy will officially be delisted from the mainboard of Singapore Exchange from 9am Tue.