OCBC Report - 27 March 2008

Singapore Exchange: Time for a relook

Summary: Singapore Exchange (SGX) has also been hit by the recent volatility in the market. Its share price has fallen in line with its regional peers, down about 57% from its 52-week high. This is reflective of the generally weak sentiment in the market where trading volume has fallen in Feb and Mar this year. Taking these factors into account, we have imputed the drop in trading activities into our 2H FY08 estimates, and lowered FY08 earnings by 11.7% to S$428.6m and FY09 earnings by 12.4% to S$434.5m. Using lower valuation of 21x (versus 19x for its regional peers and 23x for its global peers), we are lowering our fair value estimate to S$8.20 (previous: $11.20). As SGX’s stable revenue (terminal, listing, price information and other fees) is fairly secured, we believe that together with the attractive yield of 4.9% at current price level, the stock is starting to look attractive again, especially for medium to longer term holders as SGX continues to grow its suite of products and services to buoy its long term income. With recent volatile market conditions and on price weakness, SGX is a BUY. (Carmen Lee)

Rickmers Maritime: Key charterer moves into the shipping trust space

Summary: The world’s third largest container shipping company CMA CGM SA (CMA) has spun off one of its units in a play that mirrors the shipping trust concept. According to the Wall Street Journal, it will retain a 34% stake in Global Ship Lease (GSL), which would be listed on NYSE. GSL owns 12 container ships with five more under contract from parent CMA, all of which are chartered back to CMA with an average term of 11 years. CMA currently charters six of Rickmers Maritime’s (RMT) ten existing vessels – contributing about 60% of the trust’s revenue. There is no immediate threat to RMT as CMA is locked in these charters until 2015. However, the future development of their relationship will depend on the extent of CMA’s demand for vessels and the privileges it grants GSL (such as rights of first refusal). GSL would likely get first priority in a low-demand scenario. At the same time, RMT is aggressively diversifying its customer base. If its plans for 13 contracted acquisitions are approved at an upcoming EGM, CMA's share of its revenue would decline to about 21% in 2010. Maintain BUY at target price S$1.22. (Meenal Kumar)

For more information on the above, visit www.ocbcresearch.com for detailed report.

NEWS HEADLINES

- CapitaLand has granted CapitaCommercial Trust a call option to acquire office building 1 George Street for about S$1.2bn. CapitaLand said it would provide yield protection to the REIT at 4.25% for five years.
- A-REIT announced its property value gained S$483.6m at its annual valuation, an appreciation of about 14%.
- Lippo-Mapletree Indonesia Retail Trust said it will purchase Sun Plaza, a retail mall located in Medan, North Sumatra for S$147.4m.
- According to the BT, Allco REIT intends to reduce its leverage from 43% currently to about 30% over the next 12 months. - Asia Pacific Breweries has raised the annual capacity of its Vietnam plant by more than 50% at cost of US$1m.
- Tee International has won contracts for electrical installation for the Marina Bay Sands IR worth S$109m.
- Abterra Ltd will buy 49.9% of Shanxi Loudong, a producer of coal and other by-products, for up to S$181m in new Abterra shares.
- Ausgroup has won a new offshore contract worth A$12m, taking its order book above A$190m.
- SP Ausnet has upgraded its earnings forecasts buoyed by higher revenues and a debt refinancing.