OCBC Report 12 Jun 14

KEY IDEA Technology Sector: Mixed performance as uncertainties remain Continued macroeconomic uncertainties have manifested in the recent results of the cyclical tech sector. For companies under our coverage, Venture Corp’s (VMS) 1Q14 earnings fell slightly short of our expectations while ECS Holdings’ PATMI was below. Other companies which reported lacklustre results include Amtek Engineering and Hi-P International. Nevertheless, we note that the weakness was not broad-based, as there were still companies which reported notably strong results, such as Silverlake Axis and UMS Holdings. Although expectations for a global macroeconomic recovery appear to be panning out, we believe downside risks are evident given that data points remain largely mixed. Hence, we maintain NEUTRAL on the tech sector. But we upgrade VMS from Hold to BUY, with a higher fair value estimate of S$8.24 (previously S$7.78) as we roll forward our valuations to 15x blended FY14/15F EPS. VMS remains as our preferred sector pick. (Wong Teck Ching Andy) MORE REPORTS Venture Corp: Roll back the good times We believe Venture Corp (VMS) will be able to benefit from the trend of accommodative policies being implemented by major central banks and governments to support economic growth. VMS highlighted that the business sentiment of most customers has generally been positive. Recent commentaries by some of its key customers on their outlook have largely affirmed this. However, there are still pockets of weaknesses, and VMS’s management had previously cautioned that it is too early to project a broad-based sustainable recovery. With bond yields remaining at low levels, we view VMS’s 6.7% FY14F dividend yield as an attractive investment proposition. Coupled with a forecasted cyclical earnings recovery, we deem it appropriate to upgrade VMS from Hold to BUY. Our fair value estimate is raised from S$7.78 to S$8.24 as we roll forward our valuations to 15x blended FY14/15F EPS. (Wong Teck Ching Andy)

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NEWS HEADLINES - The US stock market fell on Wed, with the DJIA snapping a five-day winning streak and retreating from the record level reached on Tue. - Tiong Seng Holdings has signed a JV agreement with two listed Japanese companies to manufacture and supply precast tunnel segments for the Singapore and Malaysia markets. - Crude palm oil (CPO) prices have tumbled 17% to below 2,400 ringgit (S$934) a tonne since its peak in mid-Mar, as Malaysia continues to produce more palm oil than expected. - Total Access Communication, Thailand's second-largest mobile operator, plans to delist its secondary listing on the SGX mainboard. - Tigerair Singapore has reported a 0.9ppt YoY rise in passenger load factor to 84.9% for May, as traffic growth outpaced capacity injections. - Sabana REIT’s long-term corporate credit rating was affirmed at "BBB-" by ratings agency Standard & Poor's. - CCM Group wants to change its name to Singapore eDevelopment Ltd to reflect its new business activities including property development and investments.