OCBC Report - 15 April 2008

Singapore Exchange: Strong 3Q despite uncertain market

Summary: Singapore Exchange posted 3Q earnings of S$101.5m, +14% YoY (-35% QoQ), in line with market estimate of S$103m. The QoQ decline was due to the slowdown in the securities market, but mitigated by derivatives market revenue which grew 36% YoY to S$39m. Moving ahead, there are several pockets of growth for SGX despite present uncertain market conditions.

The increase in the net clearing fee for the MSCI Singapore futures and CNX Nifty futures with effect from 1 April 2008 should help to support revenue contribution from the Derivatives segment.

The Structured Warrant segment registered 9-month traded value of S$24.5b, surpassing the S$18.8b in FY07. The ETF segment jumped 127% YoY to S$1500m in 9MFY08. Management has declared a 3Q dividend of 3 cents, payable on 13 May 2008.

We have raised our FY08 earnings estimate to S$460.5m. Using the same parameter of 21x earnings, we are raising our fair value estimate from S$8.20 to S$8.80. At this level, yield is still attractive at 4.1%. We are therefore retaining our BUY rating on the stock. (Carmen Lee)

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Singapore Press Holdings: Still a Stalwart

Summary: SPH reported its 2Q08 results yesterday with topline rising 19% YoY to S$301.8m but net profit declined 6.3% YoY to S$99.6m. This was primarily due to lower than expected recognition from the Sky@Eleven project and weaker investment income.

About S$150m has been committed for investment into new media businesses which we anticipate is currently loss making. Along with yearly annual increments, this expansion has caused staff costs to rise 12% YoY to S$159m at half time.

We expect SPH to ride its monopolistic market position in the growing Singapore economy to insulate itself against the slowing western economies. Paragon will continue to contribute strongly to the group due to strong rental income and increased NLA by Oct 08 with its S$82m makeover.

Assuming a similar payout ratio as previous years, we estimate that the stock’s dividend yield could be 5.7% in FY08, making SPH an attractive defensive play for a shaky market. Using SOTP, we raise our fair value slightly to S$5.15 (vs. S$5.14) as SPH pays down its debt for Paragon. Maintain BUY. (Kelly Chia)

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Pacific Andes Holdings: Widening its Peru footprint

Summary: Pacific Andes Holdings (PAH) announced that its subsidiary, China Fishery Group Limited (CFG) has entered into an agreement to buy the entire share capital of Epesca Pisco S.A.C for US$19.9m. This marks its eight fishmeal plant in Peru.

This acquisition comes with one fishmeal plant and three fishmeal depots, increasing its processing capacity by 110 tons per hour to 655 tons per hour. In addition, this plant is located in the south of Lima, complementing its existing operations in the north and central parts of Peru. We view this acquisition as complementary to its operations and retain our BUY rating for PAH with fair value estimate of 82.5 cents. As its FY08 result is coming out soon, we will review our numbers then. (Carmen Lee)

Li Heng Chemical Fibre: Weaving a good FY07 showing

Summary: Li Heng Chemical Fibre Technologies (Li Heng) posted a good set of FY07 results, with revenue up 62.6% at RMB2758.1m, buoyed by strong demand for its high-end nylon yarn products, which it was able to meet by the first full-year operation of its Liheng plant at Binhai Industrial Zone. New products, namely nylon FDY and DTY, contributed positively to its product mix and output.

And thanks to higher ASPs of these products, Li Heng was able to hold its gross margin stable at 34.3% (versus 35.0% in FY06), despite higher raw material prices. Net profit jumped 89.4% to RMB905.1m, in part aided by a tax exemption, which helped to offset higher depreciation (+68.0% at RMB46.9m) and interest cost (+108.4% at RMB21.5m). We will have more after we speak to management later. We currently do not have a rating on the stock. (Carey Wong)

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NEWS HEADLINES

• US benchmark crude hit US$111.76 per barrel – an all-time high, even after adjusting prices during past booms for inflation.
• Wachovia Corp, the fourth-largest US bank, reported an unexpected 1Q loss, cut its dividend and said it will raise about US$7b in a share sale to replenish capital.
• China’s central bank chief said there’s still room to raise interest rates after six increases last year, as China tries to counter the highest inflation since 1996.
• Indonesia said it is unlikely to import rice from other Asian nations in 2008 because of big local harvests, reducing pressure on global supplies.
• The Singapore government is calling for S$5.8b worth of tenders in the construction sector this fiscal year. All in, its tenders for FY08 will touch a record S$8b.
• Yongnam Holdings has entered into a JV with Japan’s JFE Engineering Corp to undertake a S$50.3m contract for the Marina Bay Sands IR. This marks Yongnam’s second set of contracts for the IR.
• C&O Pharma is setting up a JV with a US contract research organization, XenoBiotic Labs as demand for research outsourced to Asia booms.
  

OCBC Report - 04 April 2008

Infrastructural Sector: Building blocks for growth

Summary: Singapore's construction sector is booming again after years of languishing at below S$12b contract level. Since 2004, the total contract awarded grew at annual rate of 25% and hit a new record high of S$24.5b in 2007.

For this year, the Building and Construction Authority (BCA) is projecting some S$23-27b worth of contracts to be awarded. Of this, the bulk will still come from the private sector at around 62%, but the pace of public sector jobs is likely to pick up due to numerous infrastructural projects in the country.

The slew of residential projects launched in the past 12-18 months and the re-development of residential sites have also added to the pool of available jobs. However, prices of raw materials have spiked up and could impact margins, especially if the developers or contractors are unable to pass on the additional costs.

With order books at unprecedented levels, this should help to mitigate rising construction costs. Overall, the outlook for the sector is still positive for the next 2-3 years. (Research Team)

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Pan-United Corporation: Constructing a good yield

Summary: Pan-United Corporation (PANU) recently reported its FY07 results with topline growing 45% to S$437m while PATMI (ex EI) grew a respectable 16% to S$34.2m.

Total gross dividends declared for FY07 was 4.56 cents, translating to a payout ratio of 72%. Singapore's infrastructural spending surge with mega projects like the Circle and Downtown line, Coastal Expressway, Sports Hub and Youth Olympic Village will healthily sustain PANU's pipeline for the next 2-5 years.

We project a pay out of >65% of FY08F PATMI to sustain a healthy yield of 7.5%. A divestment of freehold Octagon property at current market value could yield up to S$0.036/share cash which could be partially distributed to shareholders via a special dividend. We have not factored in a divestment of freehold Octagon property at S$20m that could yield up to S$0.036/share.

Based on our DCF model (WACC: 10.1%, Terminal: 2%), we derive a fair value of S$1.03, cross checked with a 14.7x FY08F PER (vs. peer FY08 PER of 20x). Initiate coverage on PANU with BUY. (65% upside). (Kelly Chia)

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NEWS HEADLINES

• Wilmar International is establishing a US$136m JV firm with Russia's Nizhny Novgorod Fats & Oils Group and Ukraine's Delta Exports Pte Ltd.
• SIA is adding flights to Australia, Vietnam and Dubai, but suspending service on two other routes, in response to 'changing patterns in demand for travel'.
• The Al-Futtaim offer for Robinson & Co is now unconditional, and at a higher offer price of S$7.20 per share. The S$619m offer, which will close on 30 April, has been accepted by Indonesia's Lippo Group.
• Hosen Group is planning the demolition of its existing single storey JTC standard factory and the construction of a new office cum warehouse at Pandan Loop for S$6.29m.
• The average occupancy rate for business parks has hit a five-year high, crossing the 90% mark.
• The public tender for the Ten Mile Junction development site closed with just two bids received. A Kheng Leong unit emerged as the top bidder, offering S$162.4 psf ppr or S$61m.
• Indonesia may join China, India, Vietnam and Egypt in curbing rice exports as declining inventories threaten to spark unrest around Asia.
• The Land Transport Authority has turned down SMRT Corp's request for a reduction in the S$387,176 penalty imposed for an incident in January that disrupted train services.

OCBC Report - 03 April 2008

SingTel: Optus Loses Broadband Deal

Summary: SingTel's Australian unit Optus said it is considering all of its options after the Australian Government canceled a A$958m funding for its consortium's (Opel) planned regional broadband network; this after the government found that Optus' proposed WiMax network would only meet 72% of specified premises in the under-served regional areas and not the 90% condition spelt out under the contract.

If Optus cannot make any claims, SingTel will write off A$9m it had spent on building a broadband network; Opel had intended to invest an additional A$918m on the network. While SingTel noted that the disappointing event is not expected to have a material impact on its FY08 results, there may be other implications.

For one, Optus will miss out on extending its reach into the rural areas and becoming a true network-driven competitor to Telstra. Secondly, we suspect Optus may need to increase capex on the A$500m 3G mobile phone network extension, as it will now be unable to piggyback on the subsidized Opel fibre network.

Meanwhile, Optus will need to focus on the FTTN (Fibre To The Node) tender, but current odds appear to favour Telstra. We are leaving our estimates unchanged for now and will review them once we get a clearer picture after its FY08 results announcement (due in early May). As such, we retain our BUY rating and S$4.35 fair value. (Carey Wong)

StarHub: S$10 UEFA Season Pass

Summary: StarHub has announced that it plans to charge S$10 (all prices before 7% GST) for its Sports Group subscribers to catch the 2008 UEFA European Football Championship in Singapore across all three platforms – cable TV, mobile and online.

However, those who sign up after 8 May will need to pay S$20 to catch these matches on four new channels, while non-Sports Group subscribers need to pay S$50. Out of StarHub's 500,000 subscribers base, we estimate that at least 50% will subscribe, scoring a minimum of S$2.5m for the event.

However, we believe the price that StarHub paid for the TV rights may be more than that. Hence, we would not be adjusting our figures. We retain our BUY rating and S$3.51 fair value. (Carey Wong)

Noble Group Ltd: Raising S$209m via share placement

Summary: Noble Group Ltd (Noble) has announced that it will be raising S$209m via a placement of approximately 100m new shares to institutional investors. The placement shares priced at S$2.09 each represent around 3.83% of the Group's existing share capital.

Net proceeds will be used for general corporate purposes and to support the Group's continued business expansion. In line with soaring commodities prices, we expect Noble will need more working capital to fund its business operations.

While the placement will serve to strengthen its capital base, there will be dilutive impact for existing shareholders. Pending further discussion with the management, our fair value of S$2.64 is under review. Nevertheless, we retain our BUY rating. (Lee Wen Ching)

Singapore Food Industries: Renewal of key catering contract

Summary: Singapore Food Industries (SFI) has announced the renewal of its key catering contract for a further 5-year term expiring 31st March 2013. This comes as no surprise as there is no major local competitor for this aspect of its business. We are retaining our HOLD rating with fair value estimate of 82 cents. (Carmen Lee)

BBR Holdings: Secured orders until 2011

Summary: BBR Holdings, with its three core business activities in General Construction, Specialist Engineering and Property Development, is well placed to benefit from Singapore's construction boom.

According to the BCA Singapore, construction demand is expected to hit some S$23-27b this year. BBR currently sits on some S$518m worth of confirmed orders which will last out to 2011. Based on our estimates, BBR should be able to recognize about S$200m this year and next year.

Management is also confident that it will be able to add further to its order book, given the plethora of projects currently in the pipeline. Besides its construction and engineering business, BBR also intends to focus on its property business, where it wants to be a residential boutique developer as well as a value-added property player.

BBR is also looking to grow its construction/engineering business regionally, where it can leverage on the global BBR network of 46 countries and latest internationally approved technologies. We do not have a rating on the stock. (Carey Wong)

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Tiong Woon Corporation: World-Class Heavy Lifter

Summary: Tiong Woon Corporation (TWC) is one of the leading one-stop integrated service providers in heavy lifts, heavy haulage, marine transportation and equipment installation works operating in numerous countries in the Asia Pacific region.

TWC derives the bulk of its revenue from its Heavy Lift and Haulage segment, which contributed some S$44.2m (or 67%) of its 1H08 revenue of S$65.8m, fueled by increased construction activities both domestically and from emerging markets such as Indonesia, Vietnam and the Middle East.

Going forward, TWC plans to actively seek business opportunities in the emerging markets as well as invest in higher capacity and specialized equipment. And in view of the good growth prospects in the oil-rich regions, TWC also plans to develop its fabrication and engineering competency for marine, oil & gas projects.

TWC also remains confident and will continue to work hard to grow its new income stream from fabrication and engineering projects. We do not have a rating on the stock currently. (Carey Wong)

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NEWS HEADLINES

• Brazil's Petrobras says it will order a new giant platform modeled on a working production unit and it wants the same firms, led by SembMarine's Jurong Shipyards, to build it. The original unit cost US$900m.
• Singapore's purchasing managers' index – seen as an early barometer of manufacturing – is at its lowest level in almost five years. - Island-wide office occupancy dipped in 1Q08, easing 50 basis points QoQ to 97.1%.
• Motorola is shutting down its handset production unit in Singapore by the end of this year, a near one-third cutback of its local workforce.
• CityDev's Chairman Kwek Leng Beng said the government should review its current land sales program, which was fixed in last year's buoyant market, and to rethink its decision to scrap the deferred payment scheme.
• DBS chairman Koh Boon Hwee said that although Asian banks were less affected by the US sub-prime crisis, all banks would feel the impact of the ensuing liquidity shortage.
• Biosensors announced the full launch of its drug-eluting stent system in major European markets as well as in key markets in the Middle East, Africa and Asia.

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)

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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.

OCBC Report - 25 March 2008

Jishan Holdings Ltd: Challenging environment

Summary: Jishan Holdings Ltd could potentially face slowing export demand and the strengthening RMB, which may lead to reduced export revenues and margins compression in the domestic market.

China’s textile and garments exports in February declined 32.9% from January due to lower global demand. Jishan’s export sales accounted for 43.1% of FY07 revenue, and any slowdown in export demand could affect its export revenues.

With the strengthening of the RMB against the USD, this may also reduce Jishan’s export competitiveness, thereby reducing export revenues. Moreover, a slowdown in exports may lead to an increase in supply to the domestic market, resulting in a reduction in average selling prices, thereby compressing margins.

In view of the above challenging operating environment, we are reiterating our HOLD rating and fair value of S$0.08. (Selena Leong)

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NEWS HEADLINES

- JPMorgan Chase & Co has increased its offer for Bear Stearns to US$10 a share.
- Singapore’s inflation rose 6.5% YoY in February, just shy of the 25-year high of 6.6% reported in January as the cost of housing, food, transport and communication increased. The Ministry of Trade and Industry issued a second statement in two months saying that underlying inflation remains stable.
- Property consultancy firm Knight Frank expects home, retail and office rental growth to ease. Private housing rents are expected to grow 5-15% YoY in 2008, after a massive 40% YoY gain last year.
- China Energy expects its Jiutai acquisition, the subject of an independent review, to pay off in three years and to enjoy a turnaround in profitability this fiscal year.
- Private equity firm MBK Partners has extended a deadline for its bid to take AsiaPharm private at S$0.725 a share by a week until March 31. MBK has so far received acceptances representing 28.53% of the total issued share capital.
- Boustead has been awarded two contracts worth S$32m to build water and wastewater treatment plants for mega power plants in Indonesia and Singapore.
- Midas has won a RMB61.9m contract to supply aluminum alloy extrusion profiles for metro train cars on the Shanghai Metro Line 10 project.
- STATS ChipPAC said it will end over-the-counter trading of its American depositary receipts “as soon as practicable”.

OCBC Report - 19 March 2008

Tiong Woon Corporation Holding Ltd: Results synopsis

Summary: Tiong Woon Corporation Holding Limited (TWC) recently reported record profit before tax (PBT) of S$12.8m (a surge of 45% YoY) bolstered by a jump of 49% in revenue to S$65.8m for its 1H08 results ending Dec 31, 2007.

The increased in turnover was mainly attributed to the increased income of S$15.1m (+52% YoY) from the Heavy Lift and Haulage segment as well as maiden contribution of S$9.1m from the Fabrication & Engineering segment.

TWC’s Heavy Lift and Haulage segment contributed S$44.2m (or 67%) of the overall turnover in 1H08. This segment remains the core earnings driver, fueled by the increased construction activities both domestically and from the emerging markets such as Indonesia, Vietnam and Middle East.

For its maiden shipbuilding project, we understand that the pipe-laying barge is 20% completed and is slightly behind schedule due to the recent bad weather conditions. The management reassured that they are increasing the workforce productivity to bring the current schedule back on track.

TWC’s net gearing rose from 30% in FY06 to 48% in FY07, as a result of higher borrowings to fund its fleet renewal and develop the Bintan fabrication yard. As at 31 Dec 07, TWC’s net gearing increased further to 63%. We do not have a rating on this stock. (Serene Lim)

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NEWS HEADLINES

- The US Federal Reserve cut its Fed Funds Rate by 75 basis points to 2.25%.
- Two US investment banks, Goldman Sachs and Lehman Brothers, posted forecast-topping (but still sharply lower) quarterly earnings.
- Moody’s downgraded Allco Reit from Ba1 to Ba2, and also signaled the possibility of a further cut in ratings. Allco had said earlier this month that it may sell its Australian properties valued at A$483m.
- The government will not award a landed housing parcel in Jurong West because the bids were too low, with the top bid at just S$77.8 psf.
- SIA said it was still in acquisition talks with China Eastern. Rival suitor Air China is also still hoping for a tie up with the much in-demand airline but is willing to look elsewhere if it has to.
- Mapletree Logistics Trust has acquired two properties in Singapore for S$56m under a sale-and-leaseback arrangement with a NYSE-listed Con-way Inc unit.
- Macquarie Global Property Advisors will spend about S$2b to build a commercial complex on two development sites at Marina View that it bought last year for almost S$3b.
- Kingsmen Creative has been awarded a S$14.5m deal by Resorts World at Sentosa to build props and show sets for an upcoming theme park.
- Peace Mark had received acceptances of 97.08% of Sincere Watch’s issued share capital at the offer’s close yesterday. It intends to maintain Sincere’s listed status and won’t exercise its powers of compulsory acquisition for the remaining shares.

OCBC Report - 25 Feb 2008

SembCorp Marine Ltd: Sanguine outlook, but capacity limitations may inhibit growth

Summary: SembCorp Marine (SMM) FY07 revenue surged 27.3% to a record of S$4.5b, driven by a 44.5% increase in its rig building revenue, which accounted for 55% of group turnover. Taking into account the sale of Cosco shares and the forex losses, SMM's FY07 net profit edged up 1% to S$241.0m, 6.2% lower than our estimates.

SMM is proposing a final dividend at 5.16 cents per share. FY07 operating margins improved 1.3 ppt YoY to 7.7%, and we expect operating margins to improve in FY08 and FY09 as SMM continues to cherry pick higher value contracts.

Execution cost would also decrease as familiarity with rig building processes improves. We have raised FY08 net profit estimates by 6.5% mainly to include higher contributions from SMM's 30% interest in Cosco Shipyard Group. We are also introducing our FY09 estimates. Based on 18.5x FY08 forecasted earnings, our fair value for SMM is revised up to S$4.31 (from S$4.04 previously). We are retaining our BUY rating for SMM. (Serene Lim)

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Europtronic: Improved FY07 results

Summary: Europtronic Group Ltd (EGL) registered an improved set of FY07 results, with a net profit of S$171,000 (FY06 net loss of S$9.2m) and 6.7% YoY rise in topline to S$82.0m, which is only marginally below our projected S$86.1m.

Revenue growth was fuelled by a 10.7% jump in contribution to S$56.4m from its distribution segment, translating to a 5-yr CAGR of 21.3%. Gross margin went up from 9.5% to 14.9%, due to EGL's adoption of a new marketing strategy, which resulted in a bigger customer base and higher-margin customers.

On a quarterly basis, EGL's 4Q07 topline gained 15.8% YoY and 1.1% QoQ to S$21.9m, similarly helped by its distribution segment. Although EGL reported a net loss of S$1.7m, it was a reduction of 86% from 4Q06. Meanwhile, EGL has proposed to pay S$6m to acquire the remaining 75% of Dinghan Biotechnology Co Ltd (Dinghan), of which it had already forked out US$250k to purchase the initial 25%. We will be speaking to management to find out more about this acquisition. For now, we will maintain our BUY rating. (Brandon Lee)

Innovalues: Looking to turn the corner in 2008

Summary: Innovalues Ltd posted a disappointing 2H07 performance as guided. Although revenue rose 1.9% YoY and 7.1% HoH to S$63.1m, it was blighted by USD weakness, a significant drop in its HDD business as well as ramp-up delays in its Automotive (AU) projects.

Throw in start up costs for its new HDD and AU products and factory overheads, and Innovalues sank into the red to the tune of S$3.6m, versus a profit of S$7.9m in 2H06 and S$6.0m in 1H07.

For the full year, net profit slipped 81.7% to just S$2.5m, while revenue inched up 2.1% to S$122.0m. But management remains upbeat about its overall business outlook in 2008, where it expects the outsourcing trend of American and European automotive components makers to Asia to continue and will positively boost its AU business.

It also expects its HDD business to show continued recovery although its Office Automation (OA) business may remain soft. We do not have a rating on the stock. (Carey Wong)

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Meiban Group: Strong FY07 performance, decent FY08 outlook

Summary: Meiban Group Ltd produced a good set of FY07 results. Revenue rose 26.7% to S$602.9m, gross profit jumped 51.3% to S$66.9m and net profit surged 165.1% to S$23.3m.

On a quarterly basis, 4Q07 revenue increased 11.6% YoY to S$146.0m, while gross profit jumped 41.0% to S$17.8, and net profit surged 133.4% to S$7.5m. And to reward shareholders, Meiban has declared a final and special dividend amounting to S$0.02/share, bringing the total payout for FY07 to S$0.0426.

Going forward, management expects its business to experience the usual seasonal slowdown in 1H08, and the key market for its CM business in US could face a potential slowdown. But Meiban expects the sales momentum in its PM business to continue in FY08, where the demand from new projects and new customers are expected to increase the capacity utilization of its plants in China and Malaysia.

We also understand that this is part of its ongoing efforts to diversify customer base and product lines, and that several new projects are already in the final evaluation stages and could see volume ramp up in 2H08. We do not have a rating on Meiban. (Carey Wong)

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NEWS HEADLINES

- Genting International recorded losses of S$381.5m for FY07 due to impairment of goodwill arising from its acquisition of Genting Stanley in 2006. Meanwhile, revenue rose 156% YoY to S$749.4m.
- United Fiber has awarded a US$863m contract to China Metallurgical Group Corp for the building of a bleached hardwood kraft pulp mill in Indonesia.
- C&G Industrial posted a 22% YoY growth in FY07 net profit to RMB164.2m due mainly to higher revenue, which rose 24% to RMB875.9m, spurred by increased capacity.
- FibreChem posted a 62% surge in FY07 net profit to HK$538.6m, as revenue rose 44% to over HK$1.8b because of higher contributions from a newly commissioned long fiber facility.
- Changtian Plastic & Chemical Ltd posted a 20.9% growth in FY07 net profit to RMB180m on the back of revenue growth and improved gross margins in two product segments.
- China Hongxing Sports Ltd clocked in FY07 net profit of RMB416.5m, up 94% YoY, and proposed a final dividend of RMB2.2 cents per share.
- Chunghong Holdings Ltd posted a 14% gain in FY07 net profit YoY to RMB49.8m on the back of a 37% increase in revenue to RMB752m.

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)

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

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.

OCBC Report - 18 Jan 2008

Bright World: Foundations laid for a bright future

We visited Bright World Precision Machinery (BWPM) new factory recently. According to management, the new plant will lay the foundation for the growth for the next five years. For this year, BWPM believes it is in a sweet spot due to the growing demand for higher tonnage and more sophisticated stamping machines as the Chinese government continues to encourage local companies to upgrade their manufacturing capabilities. However on the operations side, management admits that its biggest challenge is rising raw material prices, which has affected margins slightly in 4Q07, as its next planned hike in ASP is in early 2008. We are leaving our sales forecasts unchanged but will be paring back our earnings estimates for FY07 by 3.9% and FY08 by 3.1% to account for slight margin compression. And to reflect tighter credit conditions in China, our DCF-based fair value also drops slightly from S$0.80 to S$0.76, or an inexpensive 9.4x FY08F PER given the 20% bottom-line growth expected. We retain our BUY rating.

Foundations laid for a bright future. We visited Bright World Precision Machinery (BWPM) recently to have a look at its new factory which is the final stages of installation. When the new factory becomes fully operational by end 1H08, it will add another 100,000 sq metres (sqm) of production floor space, increasing the overall figure to 230,000 sqm. With the new factory’s 160-ton lifting capacity (versus 32 tonnes currently), this should enable BWPM to manufacture higher tonnage stamping machines which typically come with higher margins. According to management, the new plant will lay the foundation for the growth for the next five years.

FY08 outlook remains upbeat. For this year, BWPM believes it is in a sweet spot due to the growing demand for higher tonnage and more sophisticated stamping machines as the Chinese government continues to encourage local companies to upgrade their manufacturing capabilities. And because its products are used across diverse industries, management believes that BWPM has a viable long-term business with high barriers to entry, and should be able to ride out any short-term fluctuations with aplomb. Already, BWPM has started to invest for the future with the construction of another factory for its new cutting and bending machines, which it is already producing in small quantities in its existing factory. As the investment will be for new products, and not existing products, management believes it will not lead to excess capacity.

Raw material prices a bane. However on the operations side, management admits that its biggest challenge is rising raw material prices. Although BWPM already has plans to increase its ASP in early 2008 to help offset higher material costs, there was an unexpected increase of 5-10% in 4Q07 and this has affected margins for the quarter. On the bright side, BWPM notes that the higher raw material prices will affect the weaker competitors more and possibly weed some of them out. This will also present some M&A opportunities for BWMP to acquire technology and skilled labour at a cheap price.

New fair value at S$0.76. We are leaving our sales forecasts unchanged but will be paring back our earnings estimates for FY07 by 3.9% and FY08 by 3.1% to account for slight margin compression. And to reflect tighter credit conditions in China, our DCF-based fair value also drops slightly from S$0.80 to S$0.76, or an inexpensive 9.4x FY08F PER given the 20% bottom-line growth expected. We retain our BUY rating.

Source

OCBC Report - 14 Jan 2008

FOCUS Ezra Holdings Ltd: Exceptional gain boosted Ezra’s profits

Summary: Ezra Holdings (Ezra) posted an impressive set of 1Q08 results; topline grew by 110% YoY, while bottomline surged 4014% to S$189.2m. Stripping away the following one-off exceptional items, Ezra's recurring net profit rose 250% to S$16.0m.

The proceeds from the divestment in EOC, denominated in NOK, would be used to fund the construction of two 27,000 bhp deepwater MFSVs.

As such, the proceeds resulted in translation currency losses as the NOK depreciated against the strong reporting currency, SGD. Going forward, we note that the Saigon Shipyard would be fully operational by mid 2008.

Taking into consideration the recent gain from EOC’s disposal and the remaining stake in EOC, we expect recurring net income to rise 63% in FY08 and 132% in FY09. Rolling over our valuation to FY09, we maintain our fair value estimate of S$4.02 based on PER 18x FY09. Reiterate BUY. (Serene Lim)

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

Tee International: Maintaining growth, but fairly valued at this stage

Summary: Tee International’s (TEE) reported a 50% YoY and HoH drop in 1H08 revenue due to the shift in its focus to property development. However, bottom line improved substantially by 280% YoY and 169% HoH due to the upwards revaluation of its property holdings.

TEE has secured 15 projects to date in Singapore and Malaysia with an approximate value of S$40m, bringing its total outstanding order book to approximately S$73m. We have raised our FY08 net profit estimate from S$2.8m to S$4m, on account of the revaluation of properties.

Management has declared that no dividends will be paid out for FY08, but instead proposed a 3-for-20 bonus share issue and a 1-for-5 bonus warrants issue. Our fair value estimate has been raised from S$0.37 to S$0.51 based on 15x FY08 PER. As TEE is currently trading close to our new fair value, we are upgrading it to a HOLD. (Ritesh Menon)

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

Property Sector: The niche players

Summary: Recently, we visited four property developers with market cap of S$1b and below to see how this segment of the market is performing. These are Hiap Hoe, Ho Bee, Sim Lim and Soilbuild.

These companies target the mass to mid-tier segment of the property market and two of them (Hiap Hoe and Sim Lian) have the added advantage of tapping on their construction arms as they are developer/contractor.

Sim Lian and Soilbuild have their land banks in suburban areas, and Soilbuild enjoys a reasonable rental income from its business space. Ho Bee and Hiap Hoe are focusing on the mid-to-high end segment, where the bulk of their land banks are located in prime districts.

Although Ho Bee’s residential developments on Sentosa Cove remain its main highlight, it is able to derive stable rental income from its current portfolio of industrial and commercial properties.

Most of these companies have enough projects to ensure earnings visibility till 2009, largely riding on projects already launched or soon-to-launched. We do not have ratings on the four stocks. (Brandon Lee)

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

NEWS HEADLINES

- Mapletree Logistics Trust is set to acquire a warehouse in South Korea for S$17.7m, its first acquisition in the country.
- TUI AG, Europe’s largest travel company and owner of the Hapag-Lloyd shipping line, denied a report by a French newspaper that it is in merger talks with Neptune Orient Lines. NOL refused to comment.
- Chemoil Energy has appointed Clyde Michael Bandy as its Chairman and CEO. Mr Bandy has over 35 years experience in the energy industry.
- STATS ChipPAC plans to distribute US$813m to shareholders though a proposed capital reduction. The amount works out to 39 US cents per share based on present share capital.
- A second Airbus A380 joined SIA flight this weekend, which will also be employed on the Singapore-Sydney route. SIA said it has firm orders for another 17 A380s, for a total of 19 aircraft.
- Yanlord Land Group has launched another batch of apartments at its Shanghai Riverside City project. The company said the latest batch of pre-sold apartments commanded an ASP of about 34,500 yuan psm, a 42% increase since July 2007.
- E3 Holdings’, formerly Ei-Nets Holdings, president Anthony Soh unveiled a new China-driven strategy, focusing on real estate in the North-east region as well as solar energy.

OCBC Report - 11 Jan 2008

Jackspeed Corporation: Additional stimulus to Thailand's auto industry

Summary: We met up with Jackspeed Corporation's (JS) management recently for an update and learnt that their aviation certification progress for FAR 145 is on track.

Obtaining the FAR 145 certification would be an added boost to JS' technical competency and could improve its sales generating ability.

In addition, The Thailand Board of Investment's (BOI) new incentives for the assembly of passenger cars and motorcycles with four-stroke engines greater than 500cc would make Thailand more attractive for auto companies to establish their production base there.

This would enhance JS' growth prospects for their parts/accessories business in Thailand. We are maintaining our fair value of S$0.26, which implies a potential upside of about 15.6% from the current level of S$0.225. Hence, we reiterate our BUY rating. (Selena Leong)

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

NEWS HEADLINES

- Lian Beng Group Ltd posted a 266.7% YoY surge in 1H08 PATMI to S$8.06m and a 23.1% increase in revenue to S$106.3m, on the back of improved takings from its construction arm.
- CSC Holdings has clinched S$120m of foundation and geo-technical contracts from the public and private sectors in the past 2 months, boosting its order book to some S$330m.
- DBS, Standard Chartered and Credit Suisse will acquire a one-third stake in an Indian software and travel reservations firm for US$140m.
- Datacraft Asia Ltd has secured a US$2.5m project to help the Philippines-based Advanced Contact Solutions to expand and support its facilities to ensure business continuity.
- Top Global Ltd proposed a renounceable non-underwritten rights issue of up to 746.46m new shares ($0.025 each), with up to 559.845m free detachable warrants with a similar exercise price.
- ASJ Holdings Ltd warned that it may report a loss for FY07, due to lower sales to Europe, stock write-offs, and costs relating to the shift of its manufacturing facilities to Senai, Malaysia.
- Banyan Tree Holdings Ltd has signed an agreement to operate a Banyan Tree resort in the Emirate of Ras Al Khaimah, UAE.

OCBC Report - 09 Jan 2008

Karin Technology: Half-time report card should not disappoint

We caught up with Karin Technology for a quick update recently. As expected, all its pistons were firing in 1H08 and based on the current business outlook, management believes that the strong growth momentum is likely to continue in 2H08. Besides good performance from all its business units, Karin has also expanded both in terms of markets and products. As a result, its business is more diversified with more sales coming from China, management believes that the group as a whole is better equipped to handle any potential shocks like a recession in the US. As before, we view Karin as a ticket to ride on the growing consumerism in China, and an inexpensive one at that, given that Karin currently trades at just 4.4x FY08F earnings. Our fair value estimate of S$0.44 is based on an undemanding 8x FY08 PER and already offers >80% upside from here. Coupled with an attractive dividend yield of 8.3% expected for FY08, we retain our BUY rating.

All pistons firing in 1H08.

We caught up with Karin Technology for a quick update recently. As expected, all its pistons were firing in 1H08 and based on the current business outlook, management believes that the strong growth momentum is likely to continue in 2H08. Besides good performance from all its business units, Karin has also expanded both in terms of markets and products. As a result, its business is more diversified with more sales coming from China. Management believes that the group as a whole is better equipped to handle any potential shocks like a recession in the US.

IT distribution continues to power ahead.

According to management, its IT distribution business has done very well in 1H08, boosted by strong demand for consumer electronics in China, especially for mobile phones. In addition, Karin saw robust growth in the Industrial Material segment, mainly boosted by its recent acquisition of IMI Kabel. Karin had earlier guided for the 70%-owned unit to post S$5m revenue for 1H08 and S$10m for FY08. Management also revealed that it is venturing into a new business segment – LCD modules – although it expects the bulk of contribution to come in FY09.

IT infrastructure building up nicely.

Its IT infrastructure business has performed exceedingly well, aided by its investments in Karltec, Gamatech and KARFID. The business division further benefited from several large orders from the financial services sector, as well as the securing of new businesses like the distribution rights for Samsung LCD monitors. Growth in 2H08 is expected to remain robust, driven by continued IT expansion of MNCs in China. We understand Karin is also in the midst of securing a big IT deal – one which management believes will not only boost its revenue but also reputation as an established IT infrastructure player.

Inexpensive ticket to China’s growth.

As before, we view Karin as a ticket to ride on the growing consumerism in China, and an inexpensive one at that, given that Karin currently trades at just 4.4x FY08F earnings. Our fair value estimate of S$0.44 is based on an undemanding 8x FY08 PER and already offers >80% upside from here. Coupled with an attractive dividend yield of 8.3% expected for FY08, we retain our BUY rating.

OCBC Report - 07 Jan 2008

Mapletree Logistics Trust: For higher-risk appetite investors

Summary: Mapletree Logistic Trust (MLT) announced recently that it will be raising fresh equity worth S$400-500m via a rights issue. This is in line with our expectation, as it was close to breaching the 60% gearing limit.

However in the current climate of uncertainty, this might not be the best time to raise equity. Furthermore, unlike other REITs which acquire assets conditional on successfully raising fresh equity, MLT’s financing model works on the basis of “buy now with debt and refinance later with equity”.

This model’s key weakness is that it exposes MLT to the volatility of the capital markets. The good news is that MLT’s parent Mapletree Investment Pte Ltd (MIPL) has agreed to underwrite the rights issue. This in turn should help support pricing of the rights and hopefully not lead to DPU dilution.

We mentioned in our 2008 sector report that the industrial sector was not our choice sector as we saw many risk factors. However, corporate development could possibly be a catalyst to MLT’s unit performance.

Nevertheless, we emphasize that MLT is meant only for investors with higher-risk appetite and longer investment horizon. We continue to maintain that view and maintain our BUY with a fair value of S$1.31. (Winston Liew)

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

NEWS HEADLINES

• The Straits Trading Co Ltd has received a conditional cash offer of nearly S$1.86b from The Cairns - a privately-held investment firm controlled by family members of the late Tan Chin Tuan.
• Thai Beverage Public Co had held talks with the Thai authorities to seek a second listing on the Stock Exchange of Thailand (SET), aside from SGX.
• China Sunsine Chemical Holdings has completed its upgrade plans to cater for the rising demand for its rubber accelerators, which brings its total capacity to 39,000 tonnes. - Cosco Corporation (S) Ltd is seeking to expand capacity in China and South-east Asia as demand rises for moving raw material, fuel and consumer goods.
• CSC Holdings Limited has paid S$2.65m to acquire 70% of signed Wisescan Engineering Services - a surveyor specialising in solutions relating to tunneling and automatic monitoring survey.
• AnnAik Limited has bagged three contracts to build, operate and own wastewater treatment plants in Huzhou, China.
• Labroy Marine Limited looks set to be delisted after Dubai Drydocks World had received valid acceptances of a 98.39% stake in the shipbuilder.

OCBC Report - 04 Jan 2008

Delong Holdings Ltd: Still profitable but testing times ahead

Summary: We engaged Delong Holding’s (Delong) management for a business update and came away with muted expectations for the next 3-6 months.

Shipping costs and raw material prices continued to rise and most significantly from imported iron ore prices as it continued its unabated trek upwards, registering a 23% gain from Sep to Nov 07. Despite strong demand, HRC prices rose at a slower pace of 10% since Sep 07.

Delong has concluded negotiations of 1 of 2 long term contracts and expects its first shipment of discounted iron ore in Apr/May 08.

We expect Delong to still be profitable but margins might be squeezed as it continues to be caught between the mining majors and its customers. We raise our FY08-09 topline by 4.8% and 7.7% due to HRC ASP increments but lower bottomline by 20% and 1% due to escalating COGS. We roll over to FY08 but take a more conservative stance by lowering our valuation to 6x FY08 EPS (prev 9x FY07/0 with fair value at S$2.31 (prev S$3.25). Maintain HOLD.

(Kelly Chia) For more information on the above, visit www.ocbcresearch.com for detailed report.

CapitaCommercial Trust: Market Street Car Park Tower!

Summary: CapitaCommercial Trust (CCT) announced yesterday that it has obtained planning permission for the redevelopment of its Market Street Car Park into an office building.

The planning permission is conditional on payment of the full enhanced land value to the authorities and non extension of the 65 years of remaining land lease.

Simplistically this is akin to CCT buying a building with 65 years of lease tenure but carrying development risks. CCT has estimated that the total development cost to be between S$1.0 to S$1.5bn (subject to government valuation of enhanced land value).

Based on current market rental rates of S$14psf/mth, this translates to an attractive NPI yield of about 6.3%. This latest development is in line with our assertion that development project (as highlighted in our 2008 Strategy report) is a possible alternative to the traditional growth avenue for REITs to meet expectation.

However, the Market Street redevelopment is not a done deal as the large value of the development breaches the REIT guideline of 10% allowable development value to portfolio value. CCT has various options to overcome this rule, one is to get a JV partner to co-develop and another is to structure the development as a business trust.

We see the former as the most likely route to be taken as the latter goes against the spirit of the REIT rule. We view the latest news positively and see the proactive approach by the manager to enhance value as very positive to CCT unit price. We maintain BUY with fair value of S$2.62. (Winston Liew)

NEWS HEADLINES

• Air China parent China National Aviation Holding announced it will vote against SIA’s bid for a S$1.3b stake in China Eastern Airlines on Jan 8, and instead will make its own offer for a stake in the carrier.
• Golden Agri-Resources has proposed a 1-into-2 stock split to increase trading liquidity of the shares and broaden its shareholder base.
• Sincere Watch will sell 1% of Chrono Star Intl Participations Groupe Franck Muller SA, parent of the Franck Muller Group, for S$10.96m to Tay Liam Wee, a director and controlling shareholder of Sincere Watch.
• Yanlord Land Group has acquired a 117,500 sqm site for residential development in Shanghai for S$118.7m.
• Following former Vantage Corp chief Kea Kah Kim’s sale of his entire 77.52% stake in the company to Galleria Resources for S$48.4m, Galleria has made a mandatory unconditional cash offer for the remaining Vantage shares at S$0.24 each.
• A SembMarine unit has secured a US$280.5m contract to build a semi-submersible drilling rig with an option for an additional unit.
  

OCBC Report - 02 Jan 2008

Pan Hong Property Group Limited: Panning out well in China's lower tier cities

Summary: Pan Hong Property Group Limited's (Pan Hong) development projects are mainly in Tier 2 and Tier 3 cities, and these are currently enjoying rising economic growth prospects, soaring urbanization, growing annual disposable incomes and a lack of quality housing.

Pan Hong's substantial land bank of 3.5m sqm ranks starkly higher than its two SGX-listed peers, suggesting a more visible run of projects over the medium term. Nanchang Honggu Kaixuan (NHK) is expected to account for the bulk of Pan Hong's FY07 and FY08 revenues.

Phase 1's over 90% take-up rate should translate to higher ROE, lower gearing ratio, highly certain earnings visibility and growth.

Phase 2 is expected to follow Phase 1's optimistic demand upon its launch in mid-08. We are positive on the growth story in China's lower tier cities, and believe that Pan Hong is well positioned to ride on the sustainable demand for middle to upper-middle residential developments in China.

We initiate coverage on Pan Hong with a BUY rating and a fair value estimate of S$1.15, based on 5% discount to our estimated NAV of S$1.21. (Brandon Lee)

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

NEWS HEADLINES

• PM Lee Hsien Loong said on Monday that the Singapore economy grew 7.5% in 2007, marking the fourth straight year of strong growth.
• The Income Tax Board of Review has ruled that a serviced apartment operator's rental income should be treated as normal recurrent business income and not as income from property investments, allowing operators to claim deductions on expenses and capital allowances beyond the actual income for the year.
• Air China parent, who owns more than 12% of China Eastern's stock, called SIA's US$920m investment unfair and too cheaply priced in the first formal expression of its views.
• China's State Council publicized a new policy aimed at cushioning the impact of the unified corporate income tax law that took effect yesterday. The cabinet said that the new law would be phased in over 5 years. Companies that currently face a 15% income tax will pay 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and 25% from 2012.
• SingTel said on Monday that it would record an exceptional gain of around S$118m and post a S$96m loss from the disposal of a stake in a Taiwan company.
• UOB plants to up its stake in Vietnam's Southern Bank from 10% to 20%, pending approval from the State Bank of Vietnam.
• Babcock & Brown Structured Finance Fund will acquire a beneficial interest in 35% of the shares in Babcock & Brown Rail Invts Ltd from Babcock & Brown Grp for S$11.94m, funded by its corporate debt facility. It is also acquiring additional music copyright catalogues for US$24.3m funded with debt of US$13.0m.

OCBC Report - 31 Dec 2007

STX Pan Ocean Ltd (STX SP)(028670 KS): STX Pan Ocean, a South Korean shipping firm whose stock is listed in Seoul and Singapore, said investors will be able to shift their shares between the two markets from 2008 after regulatory changes. STX was listed in Singapore in 2005 and obtained a second listing in South Korea in September this year. "We'll work on details of the share migration process and make them available to investors soon," an STX spokesman said on Friday. "The legal barriers in migrating shares have been lifted but investors will have to bear risks associated with foreign exchange moves and the time required to make such migration." STX's Singapore-listed shares, which were halted from trading prior to the announcement, soared 25.4% to a five-week high of S$3.65 when the shares resumed trade at 1645pm, before closing 21% higher at S$3.51. The stock is still trading at a 32% discount to the Korea-listed stock, which closed at 2,990 won or about S$4.62. (Reuters)

STATS ChipPAC Ltd (STAT SP): Temasek Holdings Pte, Singapore's state-owned investment fund, is ``still considering'' delisting Stats Chippac Ltd. from the city-state's exchange. ``There remains no certainty'' about plans to stop trading of Stats Chippac in Singapore, Southeast Asia's biggest provider of chip testing and assembly services, according to a statement filed by the semiconductor company to the stock exchange today. Temasek owns about 83% of Stats Chippac through unit Singapore Technologies Semiconductors Pte Ltd. (Bloomberg)

Koh Brothers Group Ltd (KOH SP): Koh Brothers Group and Brothers (Holdings) are terminating their deal over joint venture Construction Consortium. The companies said separately over the weekend that Construction Consortium would become a wholly owned subsidiary of Koh Brothers. Brothers (Holdings) agreed last Friday to sell its 46.58% stake in the venture to its partner for $18.97m. It said that the proposed disposal would strengthen its overall financial position - about $99m of securities (including performance bonds, corporate guarantees and indemnities) that it furnished in support of Construction Consortium's contractual and financial obligations with third parties will be assumed by Koh Brothers. (BT)

China Petroleum & Chemical Corp. (386 HK): Asia's largest refiner, also known as Sinopec, said it will buy 3.66bn yuan ($501m) of assets and gas station operation rights from its parent to expand its refined oil retail network. The stock fell 46 cents, or 3.8%, to HK$11.70. (Bloomberg)

Resorts World Bhd (RNB MK): Malaysian casino operator Resorts World Bhd announced on Friday a non-renounceable offer for sale of its entire stake in Genting International to Resorts World shareholders. Resorts owns about 6.2% stake in Genting International, it said. (Reuters)

TMB Bank Plc (TMB TB): TMB Bank Pcl, a Thai bank partly owned by DBS Group Holdings Ltd., raised 37.2bn baht ($1.1bn) selling shares to ING Groep NV, the country's finance ministry and other investors. The state-controlled bank sold all of its 25bn new shares offered this month, TMB said in a filing to the Stock Exchange of Thailand today. Buyers included units of UBS AG and JPMorgan Chase & Co, the Thai bank said. TMB raised funds to boost its capital after rising bad loans caused an 18.4bn baht second-quarter loss, the most for any quarter since 2000. DBS, Southeast Asia's largest bank, didn't subscribe to the offering after ING last month won a bid to buy 30% of the unprofitable Thai bank. (Bloomberg)

Daewoo Shipbuilding & Marine Engineering Co. (042660 KS): Daewoo Shipbuilding & Marine Engineering, the world's third-largest shipyard, said it received an order to build a drill ship for 606.1bn won ($646m). The vessel, which will be able to drill for oil in deep waters, will be delivered to a company in Oceania by July 2011, Seoul-based Daewoo Shipbuilding said in a regulatory filing today. (Bloomberg)

STX Shipbuilding Co (067250 KS): STX Shipbuilding Co., the first South Korean company to set up a yard in China, received an order from the Middle East to build four bulk carriers valued at 187.8bn won ($200m). The vessels will be delivered by June 2011, the Jinhae, South Korea-based company said in a regulatory filing today. STX Shipbuilding climbed 3% to close the year at 50,000 won in Seoul. The stock has more than tripled this year, the fourth-biggest gainer among the 200 largest companies traded on South Korea's Kospi index. (Bloomberg)

Japan Airlines Corp (9205 JP): Japan Airlines Corp., Asia's largest carrier by sales, fell the most in seven weeks in Tokyo trading following a report it may sell preferred shares as part of an effort to raise as much as 150bn yen ($1.32bn). Japan Airlines dropped 15 yen, or 5.6%, to close at 255 yen at 11 a.m. on the Tokyo Stock Exchange after the report by Nikkei English News. The carrier is seeking agreements with Mitsubishi Corp., Mitsui & Co. and its four main lenders by the end of March, and may also speed up asset sales, the news service said without citing anyone. (Bloomberg)

Crude Oil (CL1 Comdty): Crude oil fell from a one-month high in New York amid forecasts that temperatures will be above normal in January, reducing demand for heating oil. Crude oil for February delivery fell 62 cents, or 0.6%, to close at $96 a barrel at 3:11 p.m. on the New York Mercantile Exchange. Futures touched $97.92, the highest since Nov. 26. Prices gained 2.9% this week and have risen 59% from a year ago. Oil is heading for its biggest annual gain in eight years. (Bloomberg)

Gold Futures: Gold rose, heading for the biggest annual gain since 1979, as a decline in the dollar boosted the appeal of the precious metal as an alternative investment. Gold futures for February delivery rose $10.90, or 1.3%, to $842.70 an ounce on the Comex division of the New York Mercantile Exchange. The metal gained 3.3% this week. (Bloomberg)

US Markets: U.S. stocks fell and were poised for their first fourth-quarter decline since 2000 after government reports on durable goods and unemployment reinforced speculation the housing-market collapse will push the economy into recession. Lower-than-forecast orders for durable goods in November and an unexpected rise in jobless claims last week added to evidence that the housing slump is spreading to the broader economy. The Standard & Poor's 500 Index has declined 3.2% since the end of September, paring its 2007 advance to 4.2%. The S&P 500 dropped 0.4 percent to 1,478.49 this week. The Dow Jones Industrial Average slipped 0.6% to 13,365.87. The Nasdaq Composite Index lost 0.7% to 2,674.46. (Bloomberg)

Other News: Insider Market: Busy insider market sees heavy buying, which was almost twice sell deals, with Directors chalking up $2.2bn transactions in 2007. China Flexible Packaging Holdings: Has crossed 1bn yuan (S$198m) in sales for the year ended Oct 31.

OCBC Report - 14 Dec 2007

Chartered Semiconductor: Reiterates muted 4Q07 outlook

Chartered Semiconductor has reiterated its disappointing outlook for 4Q07 as the quarter is essentially progressing in line with what it had anticipated earlier. During its 3Q07 results, Chartered guided for revenue to fall 2-6% QoQ to US$334-346m while net profit is expected to come in at US$1-11m. It was also looking for ASP to vary between -3% and +1% QoQ at US$858-898, and with utilization rate to hover at around 78-84%. But things are unlikely to improve much in 1Q08, which is seasonally the slower quarter. And for the rest of the year, there may be a risk that a sharp slowdown in the US economy could dampen the expected recovery from 2Q08 onwards. We are leaving our estimates for 4Q07 and FY07 unchanged but have revised down our FY08 numbers marginally to reflect a more cautious outlook for the semicon industry. We are also paring our fair value from S$1.13 (based on 1.3x blended FY07/FY08F NTA) to S$1.04 (1.2x FY08F NTA). We continue to retain our HOLD rating.

Reiterates disappointing 4Q07 outlook. Chartered Semiconductor has reiterated its disappointing outlook for 4Q07 as the quarter is essentially progressing in line with what it had anticipated earlier. During its 3Q07 results, Chartered guided for revenue to fall 2-6% QoQ to US$334-346m while net profit is expected to come in at US$1-11m. It was also looking for ASP to vary between -3% and +1% QoQ at US$858-898, and with utilization rate to hover at around 78-84%. Management previously said that this was mainly due to continuing lower utilization of its leading edge capacity, hit by lower demand of 90nm wafers from the computer sector and the expected seasonal impact of a 65nm product in the consumer sector. In contrast, TSMC had guided for a 3-6% QoQ increase in revenue and for gross margin to improve from 45.8% in 3Q07 to 46-48%.

Weaker semicon outlook from Gartner. But things are unlikely to improve much in 1Q08, which is seasonally the slower quarter. And for the rest of the year, there may be a risk that a sharp slowdown in the US economy could dampen the expected recovery from 2Q08 onwards. Gartner Inc. has pulled down its forecast for the semiconductor industry for this year and next, warning times will only get tougher as the industry moves to 32nm process technology. The industry could still slip into recession next year, depending on issues in the broader economy. The market watcher expects the chip industry to grow just 2.9% this year, down from 3.9% forecast earlier and growth will only reach 6.2% in 2008, down from 8.2%. The good news is Gartner is now forecasting 8.5% growth in 2009, up from 6.1%. Overall, Gartner projects a 4.8% compound growth rate for semiconductors from 2006 to 2011.

Revising down fair value to S$1.04. We are leaving our estimates for 4Q07 and FY07 unchanged but have revised down our FY08 numbers marginally to reflect a more cautious outlook for the semicon industry. We are also paring our fair value from S$1.13 (based on 1.3x blended FY07/FY08F NTA) to S$1.04 (1.2x FY08F NTA). We continue to retain our HOLD rating.

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OCBC Report - 14 Dec 2007

S-Shares: Huayu Cool!

Summary: China's GDP per capita has grown by an impressive 10% p.a. for the last two years, and economic indicators continue to paint a rosy outlook for the economy, setting the stage for continued growth of China companies. We expect the interest in S-Shares to sustain in 2008, bolstered by the influx of QDII funds as well as the introduction of the FTSE ST China Index. Among the universe of S-Shares, we like the Consumer sector for its ability to leverage on China's strong consumption growth, and the Manufacturing sector for its strategic advantage of having a low cost manufacturing base.

Our stock picks are:

Cacola Furniture International Ltd (BUY, Fair value estimate of S$0.75),

Man Wah Holdings Ltd (BUY, S$0.99),

China Sports International Ltd (BUY, S$2.4,

Pacific Andes Holdings Ltd (BUY, S$0.87) for the consumer sector,

Bright World Precision Machinery Ltd (BUY, S$0.80),

Dutech Holdings Ltd (BUY, S$0.535),

Midas Holdings Ltd (BUY, S$1.85)

Midsouth Holdings Ltd (BUY, S$0.90) for the manufacturing sector.

(Lee Wen Chin, Kelly Chia & Research Team)

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Tat Hong Holdings Ltd: Crane load of development projects

Summary: We are optimistic that the order momentum for the construction and infrastructure sectors will roll over into 2008, especially from the slew of planned projects in the petrochemical, industrial and commercial sectors. We view Tat Hong Holdings Limited (THH) as a direct beneficiary of these investments. In addition, we believe that the quantum of global construction investments, especially in the oil and petrochemical sectors, has only began to peak. The result is a further tightening of supply capacity, coupled with rising crane rental rates on the back of the high utilisation rates and tight supply crunch environment. As for its overseas operations, we believe THH, through its respective subsidiaries, will continue undertaking the M&A strategy to make further inroads into both China and Australia. Against this backdrop of the budding construction outlook and THH's growth potential, we are raising our FY08F and FY09F earnings to S$107.1m and S$147.0m respectively to account for the healthy earnings visibility. Our fair value is now S$4.02 based on 16x FY08/09 forecasted earnings. Maintain BUY. (Serene Lim)

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Chartered Semiconductor: Reiterates muted 4Q07 outlook

Summary: Chartered Semiconductor has reiterated its disappointing outlook for 4Q07 as the quarter is essentially progressing in line with what it had anticipated earlier. During its 3Q07 results, Chartered guided for revenue to fall 2-6% QoQ to US$334-346m while net profit is expected to come in at US$1-11m. It was also looking for ASP to vary between -3% and +1% QoQ at US$858-898, and with utilization rate to hover at around 78-84%. But things are unlikely to improve much in 1Q08, which is seasonally the slower quarter. And for the rest of the year, there may be a risk that a sharp slowdown in the US economy could dampen the expected recovery from 2Q08 onwards. We are leaving our estimates for 4Q07 and FY07 unchanged but have revised down our FY08 numbers marginally to reflect a more cautious outlook for the semicon industry. We are also paring our fair value from S$1.13 (based on 1.3x blended FY07/FY08F NTA) to S$1.04 (1.2x FY08F NTA). We continue to retain our HOLD rating. (Carey Wong)

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NEWS HEADLINES

• Delong Hldgs said its production capacity of steel coils has been boosted by 25% to 3m tones a year with the commissioning of a new blast furnace.
• AsiaPharm Group has appointed Sandoz, a subsidiary of the Novartis pharmaceutical group, as its sole distribution partner in China for a proprietary drug used in treating Parkinson's disease.
• STATS ChipPac is postponing the termination of its American Depositary Receipts program.
• Koh Brothers has won a S$78.9m contract to build a range of teaching and hostel facilities at Boon Lay Avenue.
• KTL Global, which debuts on SGX Mainboard today, announced that its IPO of 40m shares at S$0.28 was 11.3 times subscribed.
• Mercator Lines (IPO price S$0.76), an Indian-owned dry bulk shipping company, will also debut today am on SGX.
• CWT Ltd has secured a 256k sq ft of land for S$5m in Yangshan, China with plans to build a new logistics facility, its third in China, with an estimated capex of S$15m.
• Transpac Industrial Hldgs has granted a call option to UBS to buy 49.8m of its shares in Hsu Fu Chi at US$1.0048 each within 2 years.
• China New Town Dev posted a RMB220m loss in 3Q versus a gain made in the same period last year. The firm attributed the loss to zero sales of land infrastructure in the quarter.

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OCBC Report - 12 Dec 2007

Telco Sector: NBN structure as expected

Summary: The Infocomm Development Authority (IDA) last night released the details for the tender of the next generation national broadband network (NBN).

The Request for Proposal (RFP) is the formal invitation to bid for the NBN. Under the RFP, IDA revealed the proposed structure of the NBN. It will be 3-tiered, consisting of a Network Company (NetCo), with Operating Company (OpCo) and finally the Internet Service Provider (ISP).

This is exactly as we had postulated in our 2008 Telco Strategy Report dated 27 Nov 2007. The RFP will be for the NetCo and to prevent monopoly, the NetCo will not be able to vie for OpCo or the ISP.

However it can participate at the lower levels of the NBN with others. IDA also revealed that the government will be willing to subsidise up to S$750m to build the NBN. To recap, the government’s intention for the NBN is to provide accessible and affordable high speed broadband to all. So we view that at the NetCo level, it is likely be tightly regulated to ensure open access and affordability to all.

In other words, the financial return from this mega project is unlikely to be attractive. We see better return from the OpCo and ISP levels, particularly since these companies will not be regulated and the investments quantum is likely to be much lower.

Finally, if we had to place our bets on the possible winner to build and own NetCo, we would put our money on SingTel. This is because we see SingTel as wanting to continue its dominance in the domestic market. However, as its dominance is due to its extensive but dated copper infrastructure, we see this as an opportune chance to tap on possible government’s subsidy to bid aggressively for NetCo to help replace its old network. We have a NEUTRAL weighting on the sector and HOLD rating on SingTel, with BUYs on M1 and Starhub. (Winston Liew)

Pacific Andes Holdings: Value emerging at current price level

Summary: Pacific Andes Holdings’ (PAH) shares have come off in recent weeks, in line with the volatility in the market. We feel this is not warranted and at current price of 63.5 cents, value is emerging again.

We continue to like the consumer theme in China and believe that PAH is well placed to ride out any uncertain market conditions in 1H 2008 even as economic indicators point to a slowdown in the US economy in 1H08.

PAH’s trading and fishing operations are fairly defensive and consumption patterns are likely to remain strong in the foreseeable future. Seafood consumption in China is projected to rise, brought on by increasing appetite for healthier food choices as affluence grows. We maintain our BUY rating and fair value estimate of 87 cents. (Carmen Lee)

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Link Hi: In the Crossfire of Sino-Foreign Export Wars

Summary: We visited Link Hi Holdings Limited (Link Hi) last week to have a look at its PRC operations. While Link Hi has a solid basic premise – a good product, it has been caught by a ‘perfect storm’ of punitive regulatory measures in the second half of the year.

It is unreasonable to assume that Link Hi will be able to come close to replicating its successes in 1H07. Link Hi is currently in the midst of realigning its strategy, with a shift in focus towards the domestic PRC market.

Link Hi is confident that it can steer through the storm and does not expect the regulatory changes to derail its growth plans for the next few years. But first, it has to ride out the next few months. We do not have a rating on the stock. (Research Team)

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NEWS HEADLINES

• JES Intl Hldgs launched its IPO, aiming to raise S$250m. It is the third Chinese shipbuilder to list on the SGX, following Yangzijiang Shipping and Cosco Corp.
• Australian-listed property group United Overseas Australia is seeking a secondary listing in Singapore, with net proceeds of S$19.1m to be used for expansion in Asia.
• Banyan Tree confirmed reports that investments at its resort project in Vietnam will increase from an earlier reported US$270m to just under US$900m.
• Maveric Ltd plans to enter the O&G business through a RTO deal with Kim Heng Marine & Oilfield, Kim Heng Maritime, Kim Heng Tubulars, Kim Heng Shipbuilding & Engineering. It will buy the entire issued and paid-up share capital of the group.
• A unit of Keppel Corp has finally secured the use of the onshore gas pipeline network to bring in contracted Malaysian natural gas for its power station.
• Parkway Hldgs is planning a JV with Koncentric Investments to construct and operate a green-field, multi-specialty hospital in Mumbai, India. Parkway will invest S$56.9m.
• CNA Group has secured RMB75m (S$14.6m) worth of new control & automation projects in China over the past 3 months. Its order book now stands at about RMB100m as at Dec 1.
• SGX’s revised minimum bid schedule for the securities market will take effect on Dec 24.
  

OCBC Technical Analysis

Chip Eng Seng - Strong overhead resistance

Chip Eng Seng (CES) staged a rebound after hitting a low at S$0.575 in early Nov but suffered a minor correction recently. - However, the pullback over the last 2 trading sessions was made on the back of low volume. Coupled with the MACD still in an uptrend, this suggests that the pullback would be short-lived and the price ascension will resume- Nevertheless, we feel the upside may be limited due to the strong resistance from the up-trend line which connects the higher lows formed between Mar and Aug, the down-trend which connects the lower highs formed between July and Oct, and the moving average lines which are currently trending above CES’ price.- We have a resistance level at S$0.755 and support level at S$0.575.

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