Saturday, September 4, 2010

Frasers Commercial Trust

Frasers Commercial Trust
Citi Asean Investor Conference 2010

Friday, September 3, 2010

Malaysia Market Strategy -ecm

Market Strategy
FBMKLCI : 1,441.07
Target: 1,480
2QCY10 results round up

• 2QCY10 results generally inline
2QCY10 results were generally within both ECM and market expectations. 51% of stocks under coverage (47% based on consensus estimates) reported results which were within estimates. Positive earnings surprises made up 29% of stocks under coverage (28% based on consensus estimates) which was slightly higher than the 24% seen during the 1QCY10 reporting season. Meanwhile, there were fewer negative earnings surprises this quarter with 20% of stocks under coverage (24% based on consensus estimates) failed to meet estimates as compared to 22% in the preceding quarter.

Earnings upgrades picked up
The number of earnings upgrades has tripled from 5 in 1QCY10 to 15 in 2QCY10 while the number of earnings downgrade has dropped from 12 to 10. Consequently, the earnings revision ratio (number of upgrades divided by downgrades) rebounded strongly from 0.4x to 1.5x.

As compared to estimates post 1QCY10 reporting season, CY10 and CY11 earnings (excluding technology sector for which coverage was only initiated recently) for stocks under coverage have been raised by 2.2% and 4.7% respectively. While CY10 and CY11 earnings of FBMKLCI, which are free float weighted, increased by 2.2% and 2.8% respectively. Earnings upgrade has mainly been driven by the gaming sector (Genting and Genting Malaysia). Excluding the gaming sector, earnings for ECM universe actually fell by 0.6% in CY10 while CY11 increase by lower quantum of 2.8%. This can be explained by earnings downgrades in the aviation (MAS) and plantation (Sime Darby) sectors which more than negate the earnings upgrade in the banking sector.

Following the earnings upgrade, CY10 earnings growth of the FBMKLCI declined marginally q-o-q to 21.6% but was higher on m-o-m basis. On the other hand, CY11 earnings growth rose to a 9-month high of 14.6%.

• Earnings growth at 10-month high
Following the earnings upgrade, CY10 earnings growth of the FBMKLCI declined marginally q-o-q to 21.6% but was higher on m-o-m basis. On the other hand, CY11 earnings growth rose to a 9-month high of 14.6%. CY10 and CY11 earnings were raised by 2.2% and 2.8% respectively since 1QCY10 reporting season.

For ECM universe of stocks, CY10 and CY11 earnings (excluding technology sector for which coverage was only initiated recently) have been raised by 2.2% and 4.7% respectively. Earnings upgrade has mainly been driven by the gaming sector (Genting and Genting Malaysia). Excluding the gaming sector, earnings for ECM universe actually fell by 0.6% in CY10 while CY11 increase by lower quantum of 2.8%. This can be explained by earnings downgrades in the aviation (MAS) and plantation (Sime Darby) sectors which more than negate the earnings upgrade in the banking sector.

• End-2010 FBMKLCI target raised to 1,480
Following the earnings upgrade, we are raising our end-2010 FBMKLCI target from 1,390 to 1,480 using a top-down approach by ascribing a 15x P/E target. This is supported by a bottom-up valuation of 1,519. The benchmark index is currently trading at fair valuation level as it is very close to its 4-year P/E average of 14.7x. However, on a P/B basis, it seems a little stretched as it is almost trading 2.2x which is 1x standard deviation above average of 1.9x.

Sunway City -ecm

Sunway City
(RM3.94 SCITY MK) Buy
Target Price: RM5.70
Consolidating MI stakes

· Acquires 45% MI stakes in Sunway Lagoon
Sunway City has on 2 September 2010 entered into 2 share sale and purchase agreements with Dato’ Lim Say Chong and Mr Oh Kim Sun respectively for the proposed acquisition of their combined 45% equity stake in Sunway Lagoon Sdn Bhd for a total cash consideration of RM128.6m.

· Attractive valuation
Sunway Lagoon is currently a 51% subsidiary of Sunway City. Besides being a theme park operator, Sunway Lagoon also has a 60% equity stake in the 123-acre Sunway South Quay development, and a 30% stake in a 46-hectare logistic precinct in Sydney, Australia known as Wonderland Industrial Land. Based on its PATMI of RM53.3m for the 18- month period ended 31 Dec 2009 (or RM35.5m on an annualised basis), the implied trailing P/E for this transaction is just 8x. We understand that the acquisition is transacted at an attractive price to Sunway City with internal rate of return in the high teens.

· Immediate earnings enhancement without any effort
The said acquisition will be funded entirely by internally generated funds and this is not a problem for Sunway City following the listing of Sunway REIT. This acquisition will be immediately earnings accretive without any additional management effort since Sunway Lagoon is already a subsidiary of Sunway City. Based on FY09 PATMI of RM53.3m, the additional 45% stake will contribute about RM15m per annum to Sunway City PATMI or 3.2 sen EPS. Assuming the transaction is completed by end September, the said acquisition will add 2% to our FY10 estimates while FY11 and FY12 will see 6%-7% earnings accretion.

We believe these back-of-the-envelope estimates are conservative as visitorship to Sunway Lagoon theme park has improved amid higher entrance fee of RM100. Prospects for Sunway South Quay (GDV RM5.2bn) and Wonderland Industrial Land (GDV RM800m) are also looking good with the former planning launches worth RM836m in FY11 while the latter has achieved 20% sales which are pending completion.

· Reiterate BUY
We keep our earnings and valuation unchanged until we visit the management. Sunway City remains a BUY as it is undervalued, currently trades at 38% discount to RNAV of RM6.36. Our TP of RM5.70 is based on 14x P/E to mid CY11 earnings. This is undemanding given its 21.2% EPS CAGR over the next 3 years. Key risk includes (1) slower than expected sales, (2) delay in launches, and (3) imposition of lending restriction by BNM.

Cambridge Industrial Trust -rbs

Restructuring debt

CREIT’s recent acquisitions have led to an upgrade in portfolio quality. Management intends to restructure debt to bring down gearing and interest costs. We raise our TP to S$0.58 and reiterate Buy.

Upgrading quality of property portfolio

CREIT’s recent acquisition of two properties has upgraded its property portfolio. CREIT’s asset lease expiry profile and tenant mix has improved after the S$37.7m acquisitions. To fund them, CREIT raised S$40m from a placement of 86.7m of new units at S$0.478/unit. Of the proceeds, S$24.7m will be used to finance the purchase, with the rest kept for future acquisitions. Following the purchase, CREIT’s gearing ratio falls to 41.5% from 42.6% as only 34% of the acquisition will be funded by debt.

Potential debt restructuring should improve earnings

Management expect CREIT to realise S$90m from the sale of non-core assets by the year end. In August, CREIT paid down its existing debt facility by S$32m bringing its gearing down to 39.5% from 42.6% as of June 2010. Management plans to pay down a further S$30m of the proceeds and use the rest for asset upgrades. The company also intends to restructure its current debt of S$360m which was refinanced at the peak of financial crisis in February 2009 at 5.9% vs current spot rate of 3%, on our estimates. This raises our distributable income by 6.9% for FY10-11F.

Slight dilution expected on acquisitions

The new properties generate a net property income yield of 8.3%, akin to CREIT’s yield prior to the acquisition. Given the expected dilution from the placement, we estimate distributable income per unit (DPU) dilution of 3% in both FY11 and FY12. The new properties will have built-in rental escalation of 2% pa on average during the lease period of seven years vs 2.5% for CREIT pre-acquisitions. Gross floor area at one of the acquisition targets (Chin Bee) may be enhanced by 40%. This should reduce dilution to just 2% in both FY11F and FY12F.

Reiterate Buy with higher target price

Our DCF-based target price is raised to S$0.58/unit (from S$0.53) on the back of our earnings upgrade. We have reduced our cost of equity to 12% (from 13.2%) as bond yields continue to trend down. The stock yield is attractive, in our view at 9.2% in FY10 and 10% in FY11 vs peer average of 7.9% and 8.4%, respectively. It trades at 13% discount to book value vs 0.8% discount for peers, on our analysis.

Thursday, September 2, 2010

SG REITs on a buying spree in 2010

Source: TheedgeSingapore

NRA: SaizenREIT Upside catalysts include new property acquisitions

Maintain HOLD
Current Price S$0.16
Fair Value S$0.16

Upside catalysts include new property acquisitions

_ Resumed distribution with DPU of 0.26 Scts. Saizen declared a DPU of 0.26 Scts in FY2010, which is above our expectations of DPU of 0.1 Scts. The distribution represents cash accumulation of two months, after the repayment of YK Keizan loan in April 2010. The property operations remained stable. 4QFY2010 net property income (NPI) of JPY676.6 mil grew 3.3% QoQ due to a marginal 0.5% QoQ improvement in rental revenue as well as a 4.5% QoQ decline in property operating expenses. FY2010 Group NPI of JPY2.78 bil declined 4.5% YoY due to a 3.2% YoY decline in gross revenue arising from the divestment of five properties from YK Shintoku in 1HFY2010 as well as a decline in rental rates of about 5.3% from previous contracted rates on new contracts entered into in FY2010. Overall occupancy rates remained healthy at 91.3% as at 30 June 2010.

_ Improved credit market condition in Japan. The refinancing of JPY5.9 bil loan with Societe Generale in June 2010 signaled further improvements to the credit market conditions in Japan. Financial institutions are now open to larger quantum loans although at more stringent loan criterion compared to previously.

_ High likelihood of refinancing YK Shintoku loan by 1HFY2011. This shift in the credit market conditions brings about a high likelihood of securing refinancing facilities for YK Shintoku loan of JPY7.1 bil in the near term. Currently, management is still in negotiation with bankers but is optimistic of securing a facility by 1HFY2011. Also, the loan servicer of YK Shintoku has crafted an orderly asset divestment plan to reduce the outstanding YK Shintoku loan which further reduces the likelihood of a foreclosure on YK Shintoku. As at 30 June 2010, Saizen has an aggregate of about JPY12 bil of unencumbered properties which can serve as collateral for new loans.

_ Rebalancing property portfolio to enhance quality and growth potential. Management is exploring opportunities to divest existing properties and make new acquisitions to enhance the portfolio’s quality and growth potential. In particular, management is looking at the mass market residential property in Tokyo where valuation gap is wider than the regional cities, prices have depreciated by 15% to 20% since the height of the global financial crisis and there is relatively higher population growth from an influx of people from the regional cities.

_ Valuation and Recommendation. In light of rapid improvements and stability in the credit market and Saizen’s strengthened balance sheet position, we now assume that management efforts to refinance the YK Shintoku loan will be successful. However, based on the past few traditional loans secured by Saizen, loan criterion are expected to be stringent and this in turn will impact distributions. Accordingly, we have revised our distribution forecast and using DDM, we value Saizen at 16.0Scts (on a fully diluted basis). We also removed the previous discount to valuation (of 30%) to arrive at our target price of 16.0Scts (previously 17.0 Scts). DPU yield of about 5.7% (FY2011) is expected to improve to between 8.5% to 9.0% in the longer term with improving rental conditions and lower interest costs with gradual loan repayment. Upside catalyst includes news flow on property acquisitions. HOLD.

Wednesday, September 1, 2010

cycle of market emotions

China Taisan Technology Group Hldgs Ltd -cimb

China Taisan Technology Group Hldgs Ltd
On track for a record year

Initiate with BUY, target price S$0.30, 50% upside. We initiate coverage on China Taisan (Taisan) with a BUY recommendation and a target price of S$0.30, offering 50% upside potential. Despite the drop in orders in FY09, Taisan managed to stay in the black. Our target price is pegged to HK-listed peers which are trading at an average CY11 P/E of 6.3x. We have not applied any discount as we believe valuations could improve if the TDR listing is successful.

Immediate catalysts. Orders have returned and by 1H10, the group has reported a net profit of RMB 109.4m, already exceeding FY09’s profit. Obviously, the proposed TDR listing could move valuations higher as the Taiwanese peer cited by the Group is traning at double digit P/E. However, until shares are fungible between Singapore and Taiwan, it would be hard for Singapore investors to benefit from any higher valuation of the TDR. Gross margins could improve back to more than 30% if the 20m RMB investment via collaboration with the academic sector yields positive results.

Strong balance sheet still. As at end 1H10, the Group remains in a net cash position. We believe its aggressive capacity expansion plan can be managed with the help of funding from TDR, bank borrowing and internal cash flow. Also, it is unlikely that Taisan will execute its expansion plan at one go. A more likely scenario that we anticipate is at least a two phase spaced expansion.

Valuation and recommendation
Attractive valuation. Pegging Taisan at the CY11 sector average P/E of HK-listed peers of 6.3x gives us a price target of 30cts for China Taisan. This remains below that of Taiwan listed peer, Far Eastern New Century which is trading at CY11 P/E of 16.7x and that of its end customers and HK-listed sports apparel companies (Taisan’s end customers) which are trading at an average CY11 P/E of 14.6x. The TDR listing should hopefully improve valuation but currently it would not be possible for the Singapore shares to be transferred to Taiwan to be sold at the price there if it that price is higher. On this issue, Taisan has also been studying Oceanus TDR program where the second TDR issue offered Oceanus shareholders a chance to tender their shares for trading on the Taiwan market. Our discussion with management suggests that Taisan is open to giving this matter more thought if the need arises.

However, we must caution investors on two risks:
1) eventual exit of major shareholder, Mr Choi even though we understand that he is no longer involved in the running of the business; and

2) The capacity expansion has its risks as orders can disappear quickly as in FY09. However, Taisan managed to remain in the black despite the lack of orders in FY09. If demand disappears with the new 25,000 tonnes plant under construction, the Company may have harder stay staying in the black. Also, FY09 was probably a “black swan” event that takes only once in reasonably lone time period. The advantage of the new plant could be more order wins from established brand names as these customers may feel more at ease dealing with a supplier that has a new and reasonable “high tech” factory. We understand that the current factory has aged and due to the expansion needs of the past, Taisan has not had the luxury of executing an orderly expansion plan for this facility.

Sunway City -rhb

Sunway City
Share Price : RM3.88
Fair Value : RM5.45
Recom : Outperform (Maintained)
Aggressive Launches of New Properties

♦ RM1.76bn and RM2.6bn worth of new launches for 2010-2011. Following Suncity’s targeted new launches of RM1.76bn for 2010, management plans to put RM2.6bn GDV worth new projects into the market next year. These include:

(i) South Quay condo and commercial component; (ii) Melawati garden villas; (iii) Sunway Velocity service apartment; and (iv) Overseas projects – Jiangyin and Tianjin SSTEC project. New sales have been strong since late last year, and it continued to replenish unbilled sales, which stood at RM743m as at Jun 2010, compared to RM630m in March 2010. Considering the aggressive launches of new properties in the pipeline, we believe earnings growth for the property development division will be able to sustain over the next five years.

♦ Continued expansion in property investments. After the injection of eight properties into Sunway REIT, Suncity is left with a few properties in its property investment portfolio. To re-build its recurring income sources (apart from the REIT’s contribution to associate income), Suncity will construct six new commercial properties, including (i) Sunway SOHO and office suites; (ii) The Pinnacle; (iii) Sunway Velocity Shopping Mall; (iv) Sunway Monash University Residence; (v) Sunway Medical Cancer Centre; and (vi) Lost World Hotel in Tambun. Given a typical construction period of three years, we estimate that, these properties will only start their rental contribution in 4-5 years time.

♦ Plenty of room to gear up for landbank replenishment. Following the listing of REIT, Suncity will be in a net cash position. This provides ample capacity for the company to gear up to fund the construction of the six new property assets and new landbank acquisitions. Indeed, Suncity is likely to seal two deals in 2H2010. We maintain our balance sheet forecast for now, until the company makes announcements on its debt funding for landbank acquisitions.

♦ Forecasts. Unchanged.

♦ Risks. The risks include: 1) competition from peers; 2) delays in launches and approvals; 3) rising raw material prices; 4) imposition of cap on mortgage rate; and 5) country risks.

♦ Investment case. We adjust our RNAV estimates to include Sunway Giza and Sunway Hotel Hanoi (acquisition completed in June 2010) as investment properties, and contribution from a new Penang land and Tianjin Eco City to projects DCF. As such, our fair value is raised to RM5.45 from RM5.20, based on an unchanged 15% discount to its RNAV of RM6.41/share. Maintain Outperform .

Tuesday, August 31, 2010

Redefining Mobility with Spice i2i

Redefining Mobility with Spice i2i
MOBILE Internet technology has made the world accessible to every person on the street, and as it advances, mobile and Internet connectivity will increasingly connect the common people. Up and coming is the space created by the convergence of communications, computerization, Internet and entertainment technologies. Out to ride the trend is home-grown enterprise Spice i2i, a one-stop voice, data and value added services provider with an edge in Mobile Internet technology.

Formerly known as MediaRing Ltd, Spice i2i became a part of global business group, the Spice Group, in 2009. Spice i2i espouses the driving mantra of the Spice Group, “innovation to infinity”. Leveraging on the group’s intelligence and experience in the sector of telecommunications, the Spice mission is about continuously enriching and realizing the dreams of the emerging mobile society.

Although the initial game rules have been set by incumbents of prominent brands, the race has in fact just begun. Spice i2i’s vision and strategy for the future is geared towards mobile devices, retail and value-added services. Dubbed Mobility 2.0, the vision builds upon the integration of the Spice i2i brand into the Spice Group’s ecosystem, so that the digital lifestyle is not just for the technically savvy but also available to the laymen.

Adopting a device-led strategy strengthened by retail muscle, Spice i2i will participate in the fast moving mobile handset market that is growing at more than 50% year-on-year, through its joint venture company, Spice-CSL Pte Ltd. “Besides distributing and retailing pre-embedded Spice and Spice-CSL handsets, we intend to build a large subscriber base through appropriate branding, community building and technologically superior products, strategies and customer satisfying differentiators,” Dr. Modi envisions.

Spice i2i’s latest product, S-unno will drive the mobility vision from a VAS innovation perspective. S-unno is a cross-platform, IP-based service, that allows users to make international mobile calls from wherever they are in the world independent of their mobile operators, using WiFi or mobile Internet. More than just a mobile VoIP service, sending messages, transfer of talk-time credits, content and application downloads are just some of the initial features of the S-unno service. Now available on major mobile phone operating systems such as Windows Mobile, Google Android and Symbian, soon on Blackberry and iPhone as well, S-unno seeks to benefit as many mobile consumers as possible in a ubiquitous manner.

Moving beyond the Internet telephony industry to transform into a mobility services provider that constantly pushes the boundaries in mobile communication and entertainment, Spice i2i’s mobility and digital lifestyle vision spans from Ivory Coast to Indonesia. The company’s mission is to build a pan-Asian telecommunications and mobility business that can compete against leading global players in the areas of manufacturing, distribution and retail. Singapore, with its enabling culture, infrastructural support, and the country’s vision to become the epicentre of the global mobile and Internet revolution, is a natural choice for Spice Group to establish a foothold in this part of the world.

Customers have indeed responded with great enthusiasm so far, going by Spice i2i’s first half results. Its turnover for the first half of 2010 was a whopping US$104.5 million, an increase of 81.6 percent over the same period in 2009. This growth is attributable largely to its sale of mobile devices, and also due to contributions from its new subsidiaries, like Spice-CSL Pte Ltd.

Spice i2i is unwavering in its pursuit of the Mobility 2.0 vision that defines “Connected Spice Life”, which also connotes the brand personality of Spice-CSL. It will continue to focus on mobile-related devices and services, and also amalgamate its operations so that it can integrate content, services and delivery platforms—not only to bring its customers the ultimate in mobility experience, but also to fully realise the connectivity and freedom that have always existed in potentia in mobile technologies.



Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)

乔治·索罗斯(George Soros)



高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo

There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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