A number of companies (mainly Temasek-linked) have made cash calls over the past few months, including DBS, Capitaland, CapitaMall Trust, CSM and Ascendas REIT. This has raised the Tier 1 CAR for DBS and lowered the gearing ratios for the others. The current recession will have an adverse impact on profitability and cash-flow generation for most companies and we expect more of them to make cash calls to beef up their balance sheets. These can include Temasek-linked and non Temasek-linked companies.

We scanned through the list of stocks under our coverage and identified these stocks which we feel are worthy of mention with respect to this cash call issue:

• UOB (BUY, TP:S$11.60) has the lowest Tier 1 CAR of 10.9%, after DBS completed its S$4b right issue and now achieved a proforma Tier 1 CAR of 12.2%. There has been market talk that UOB may beef up its capital closer to its peers.

• Suntec (NEUTRAL, TP:S$0.75) has a S$700m CMBS due in Dec 09. Its current gearing of 0.34x is higher than the sector average of 0.29x. We believe the probability of a cash call is relatively higher than its peers.

• Swiber (SELL, TP:S$0.23) has a net debt to equity ratio of 1.0x. We are also concerned with its ability to repay the S$109m bond maturing late FY09/early FY10. We believe a cash call will help strengthen its balance sheet.

• China Fishery (BUY, TP:S$0.86) has lowered its net gearing to 0.87x (from Sep 08’s 0.93x). To conserve cash, the company is giving out script dividends. We do not rule out the possibility of a cash call to strengthen its balance sheet.

There are other companies which we feel are less likely to raise cash now (although we do not completely rule out the possibility). These include Parkway, Indofood and Keppel Land.
A number of Temasek-linked companies have made cash calls over the past few months. These include:

• DBS (NEUTRAL, TP: S$8.50), which raised S$4b through a 1-for-2 rights issue at S$5.42/share, thereby raising its Tier 1 CAR from actual Dec 08’s 10.1% to a proforma 12.2%.

• Capitaland (BUY, TP: S$2.60), which raised S$1.84b through a 1-for-2 rights issue at S$1.30/share, thereby lowering its net gearing to 0.31x and expanding its cash position to S$5.6b (post taking up CMT's pro- rata rights issue).

• CapitaMall Trust (BUY, TP: S$1.26), which raised S$1.23b through a 9- for-10 rights issue at S$0.82/share, thereby repaying all its outstanding loans for 2009 and funding of asset enhancement plans, as well as lowering its gearing to a comfortable 0.29x.

• CSM (SELL, TP: S$0.11), which raised S$464m through a 27-for-10 rights issue at S$0.07/share. Ex-rights was on 16 Mar 09. The exercise will lower net gearing from Dec 08’s 1.04x to a proforma 0.69x.

• Ascendas REIT (BUY, TP: S$1.41), which raised S$408m through a private placement and preferential offering (1-for-15) at S$1.16/share, thereby aiding in the repayment of outstanding debts and funding of development projects, as well as lowering its gearing to 0.33 – 0.36x.

Going into an economic downcycle, we believe more companies will do cash calls to beef up their balance sheet. Temasek-linked companies have started the ball rolling, but we believe non Temasek-linked companies may soon be coming out more aggressively to raise capital as well.