OCBC Report

Budget 2008 – Surplus of S$6.4b

Summary: On Friday, the Finance Minster Tharman Shanmugaratnam unveiled a fairly pro-individual budget. As expected, there was a slant towards the lower to mid-income individuals and families as well as older Singaporeans. Growth dividend of S$865m will be dished out to all adult Singaporeans. In addition, there will be a 20% personal income tax rebate, capped at S$2000 per person. There were other schemes for education and R&D.

On the business front, several other measures/incentives were announced with full details in May 2008. We view these measures as part of the on-going initiatives to grow our enterprises and ensure Singapore's competitiveness, especially in view of the more challenging conditions this year and rising inflation. (Research Team)

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Venture Corp: 1Q08 outlook likely challenging

Summary: Venture Corp's (VMS) 4Q07 revenue rose 14.6% and 3.0% QoQ at S$96.8m, while net profit came in at S$74.3m, down 5.1% YoY and 2.6% QoQ, but within our forecast. For the full year, revenue rose 23.9% to S$3,872.8m and earnings jumped 25.4% to S$300.0m. VMS also declared a final tax-exempt dividend of S$0.50/share, adding to a special dividend of S$0.08 declared in 2Q07.

Going forward, VMS expects the operating environment to remain challenging in 1Q08 and even in 2Q08, given the current volatile financial and uncertain economic outlook. However, management believes that the uncertain situation could also motivate more US and European firms to outsource more to Asia where VMS is well placed to seize these opportunities.

In view of the challenging environment over the next three to six months, we felt it was prudent to reduce our FY08 figures. This pares our fair value from S$17 to S$13.40, which is also based on a more conservative 12x FY08F PER (versus 14x previously).

However, we believe VMS will be able to ride through the rough patch with aplomb and see stronger earnings growth in FY09. Hence, we maintain our BUY rating. (Carey Wong)

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NEWS HEADLINES

- ComfortDelGro Corporation posted an 8.8% YoY dip in FY07 net profit to S$223m, but revenue rose 8% to S$3.02b, due to strong performance of its overseas bus and taxi operations.
- MI-Reit recorded a 3Q08 NPI of S$6.3m (6% above forecast) and DPU of S$0.0192 (3.2% above forecast), helped by contributions to rental income from completed acquisitions.
- Chartered Semiconductor has agreed to purchase 100% of Hitachi Semiconductor Singapore Pte Ltd for US$233m in cash.
- Parkway Holdings has bided a record S$1.25b for a hospital site at Novena, which has a permissible GFA of 778,768 sq ft.
- The Straits Trading Company Limited reported a 22.5% YoY gain in FY07 revenue to S$1.1b and a 150% surge in net profit to S$485m, aided by an exceptional gain of S$420m.
- Macquarie MEAG Prime REIT is expected to go through a strategic review soon that may result in the Macquarie group selling its 26% stake in the Singapore-listed REIT.