SingPost announced this morning that it will be acquiring 30% of USA-incorporated Postea Inc via a cash payment of US$9.4m and a non-cash consideration comprising intellectual property (IP) rights for its SAM, SAM PLUS, POST21 and vPOST systems to Postea valued at US$24.3m. SingPost will leverage Postea's expertise and technology to further develop its IP. While we are positive on this development, we are keeping our earnings estimates for now as it would take time to develop technology and enhance IP. We remain Neutral on the stock given limited share-price upside. Our DDM-derived target price (discount rate 8.5%) is intact at S$0.80.

BIOSENSORS International Group swung to a net profit of US$379,000 for its fourth quarter ended March 31, 2009, from a US$20.7 million net loss for the year-ago corresponding quarter. But the turnaround was not sufficient to lift it out of the red for the full year. Total revenue for Q4 surged 87 per cent to US$22.4 million, largely boosted by sales of its flagship drug eluting stent (DES) BioMatrix, which obtained the European CE mark in January last year. DES products account for US$10.7 million of its total revenue in Q4.

Biosensors also benefited from a US$2.8 million income arising from its share of profit in a jointly controlled Chinese company JW Medical. The performance in the quarter would have been better, if not for a US$3.7 million foreign exchange loss. For the whole year, the group slashed its loss to US$1.1 million, from US$31.6 million for FY2008. Total revenue surged to US$119 million from US$44.3 million. Of that, US$45 million came from licensing and royalties.

Operating expenses for the year went up 27 per cent to US$73.3 million, mainly due to rising sales and marketing costs required for the launch of BioMatrix in Asia and Europe. It was partially offset by a 22 per cent fall in R&D expenses to US$20.9 million. The group was also dragged down by a US$9.98 million tax cost, which more than wiped out its profit before tax of US$8.86 million.

Biosensors said this was because of the tax expenses related to the US$40 million receipt from a licensee and royalties revenue being recognised. The results statement revealed an unsecured debt of US$46.8 million. This arose from a US$30 million convertible bond issued in 2006 and due in November this year.

FY09 revenues of US$119.0m are marginally ahead of our estimate of US$117.0m. BioMatrix revenues were down 3% QoQ due to exchange rate fluctuations even though sales volume increased. Full year net loss was US$1.1m, better than our estimate of a US$11.2m loss, due to better gross margins, lower R&D expenses, as well as exceptional write-back from restructuring in USA and Netherlands (US$1.7m) and tax credits (US$1.5m) from withholding taxes paid.

Two subgroup analyses of the LEADERS trial presented at EuroPCR in Spain (May 09) continued to demonstrate equal safety and efficacy to J&J’s Cypher stent, this time in complex patient populations. Strong clinical data and growing industry acceptance of biodegradable polymer drug-eluting stents (DES) are key positives for Biosensors, in our view.

The company reiterated its product revenue guidance for FY10 (US$90m-100m excluding licensing). We believe Biosensors will turn mildly profitable in FY10 as BioMatrix revenues continue to ramp up and margins improve further. In FY09, the company secured regulatory approvals for BioMatrix in Brazil, India, Egypt, Mexico and Venezuela. We expect the company to secure regulatory approval for China in FY10.

We base our price target on DCF, assuming 11% COE and 3% terminal growth.

Results in line. SingTel posted a 12.9% yoy decline in full year attributable income to S$3.5b, while operating revenue increased 0.6% yoy to S$14.9b. For the quarter, PATMI of S$903.4m was 17.3% lower than 4Q09, and operating revenue came in 5.1% weaker yoy to S$3.6b. Full year results were in line with expectation, representing 96% of our full year forecast. A final dividend of 6.9 cents/shr was declared, bringing total dividends for the financial year to 12.5 cents/shr.

Impacted by weakness in AUD. Stronger operational performance in Singapore and Australia was negatively impacted by the weakness in Australian Dollar and regional currencies. At constant rates, the Group's revenue would have increased 10% and underlying net profit would have been up 11%. Included in full year results was an exceptional loss of S$122m for the quarter, compared to S$150m gain in the 4Q08.

Under review. We are currently reviewing our target price and recommendation. More details to follow.

Slowing faster than expected. Pan-United Corp (PAN) reported 1Q09 revenue of S$128.3m (+10% YoY, -12% QoQ) and PATMI of S$9.9m (-15% YoY, -22% QoQ). The better topline was contributed mainly by greater volume of Ready Mixed Concrete (RMC) sold but softening prices and thinner margins took a toll on PAN's profit. While we signalled a slowing down in our previous reports, we did not expect the collapse of RMC prices of this magnitude.

Forecasts for RMC business. Business for the RMC business continues to be strong with infrastructure developments continuing on their run in 2009 (Exhibit 1 shows sustained volumes). However, competition and the fall in raw material costs have pressured selling prices. While the fluctuation clauses work to help buffer rising costs in the commodity boom cycle, it also works in a counter cycle to align prices to the current market environment. On top of decreasing ASPs for RMC, we also think that some competition has entered the market with "low-ball bids" to win some future work despite attaining thinner margins. Over the rest of 2009, we are expecting margins to eventually stabilise and possibly trend upwards again as commodity prices start its trek up. While the thinning margins will work against PAN's earnings in the near future, we think that it will eventually weed out weaker players who have no scalability to compete.

Port and Shipping. Management has signalled that the pick up in these two divisions will help buffer the fall in bottomline contribution from its key RMC business. In particular, the fully utilisation of its larger fleet of tugs and barges will help prop up bottomline as charter incomes from Singapore flagged vessels are tax exempt. The port in China is also seeing signs of life with China's stimulus package flowing through the system.

Share price run up lowers yield. We have refined our estimates and DDM parameters (Ke: 15% to 10%) with changes in required returns. Our DDM fair value is now S$0.52 (prev. S$0.47). While PAN's share price has risen, it continues to lag the FSSTI in price movements. Investors have typically piled into the company for its good dividend yields. However, the rise in its share price has caused FY09 yield to fall to ~6.8% while the stock trades at ~8x FY09F PER (above 7.3x FY08 PER where earnings grew at a much faster pace). With the limited upside, we are downgrading our rating to a HOLD.

Soft 3Q09 in a challenging industry. SSH Corporation (SSH) reported a 14% YoY fall in 3Q09 revenue to S$53.5m as the group continued to feel the impact from the economic downturn. Net profit fell 69% YoY to S$2.1m, lower than expected, with gross profit margins affected by a provision for inventories write-down of S$2.7m and higher other operating expenses arising from provision for impairment loss on leasehold property and foreign exchange losses. Gross profit margin for 3Q09 was 22%, lower as compared to 26% in 3Q08. Peers in the same industry have similarly been affected by the challenging business conditions with companies such as Hupsteel expecting to report a loss in its upcoming results and Asia Enterprises posting a 66% YoY fall in net profit for the past quarter.

Industry outlook remains bleak. From what we gather, steel distributors and end-users are likely to continue de-stocking amid scarce signs of a sustained recovery. Steel prices may also experience more downside risk if iron ore prices continue its downtrend in the face of weak demand. Steel demand in most sectors, (with the exception of the infrastructure industry aided by government expenditure), has to stabilize first, probably in the later part of this year, depending on a myriad of factors such as the efficacy of government stimulus packages worldwide, consumer sentiments, corporate investments and bank lending activities. SSH also said that the global economic slowdown has resulted in several projects being deferred amid softer prices for steel. The group's revenue has been affected mainly by lower steel prices and lower demand for its products.

Maintain HOLD. This latest set of results is a reflection of general business conditions across the industry, as seen by results of SSH's peers. If we were to exclude the provision for inventory write-down and property impairment, net profit would have been S$5.4m instead of S$2.1m. The group expects the rest of FY09 to remain challenging, which is the consensus view among most industry players. We are revising our earnings estimates downwards with the lower than expected results and now peg our fair value to 0.6x FY10F NTA (in line with peers) with lower earnings visibility and also fewer available consensus EPS estimates for the group's peers. As such our fair value is raised to S$0.16 (prev S$0.11). Maintain HOLD.

Golden Agri Resources’ proposed 17-for-100 rights issue is highly dilutive and we are downgrading the stock from BUY to Outperform It’s still unclear why the company needs the issue - at a 56% discount to TERP - given its low gearing and lack of imminent acquisitions. Factoring in the assumed debt reduction, net profits would be 3-4% after the issue. Our adjusted target price of S$0.41 implies 5% upside.

Rights issue is dilutive. Golden Agri Resources’ (GGR SP - S$0.43 - O-PF) proposed a 17-for-100 rights issue with a free warrants issue. The rights issue was priced at a 56% discount to yesterday’s theoretical ex-rights trading price (TERP). We see the rights issue as negative as it is highly dilutive while only raising US$215m. Moreover, the company has no imminent need for the cash as it can cover its working capital and capex needs for the next year. Only if the company were to announce a value-adding acquisition would the rights issue make sense.

Some upside remains. As a result of the proposed rights issue, we reduced the company’s expected debt by US$200m. A reduction in interest expense equates to a 3-4% higher net profit in 2009-10. After adjusting for the dilution, our target price declines from S$0.45 to S$0.41. Our new target price implies 5% upside to yesterday’s TERP price of S$0.39. With limited upside after recent outperformance, we downgrade our recommendation to Outperform.

Wilmar’s 1Q FY09 results were ahead of market expectations – net profit was 32% of full-year consensus figures.

Despite a 31% YoY drop in Wilmar’s revenue, 1Q FY09 net profit was up by 11%, with EBIT margins improving 3.9 p.p. to 11.3%. The standout performers were the palm oil refining and consumer product divisions.

Wilmar is looking to list 20%-30% of its China operations in Shanghai or Hong Kong. This will clearly create excitement in the market, as its China division has the strongest growth prospects. We estimate that55% of Wilmar’s earnings are from China. Wilmar is the leadingoilseed crusher, edible oils processor, consumer pack oils merchandiser and oleochemicals manufacturer in China. We estimate that the top 20 largest market cap stocks in China will trade at an average P/E of 17x in 2009E and 15x in 2010E. Based on market consensus figures, China Agri is trading at a FY2009E P/E of 8x whileChina Yurun is at a FY09E P/E of 13x. We think Wilmar clearly deserves significant premium for its dominant presence in China and strong management.

We have revised up our FY09E and FY10E earnings forecasts by 18%, and have therefore, upgraded our target price to S$4.54 (from S$3.84), assuming that the China profits trade at a P/E multiple of 16x, while the non-China profits trades at a P/E of 14x. We maintain a NEUTRAL rating, as earnings visibility is difficult.

In view of volatile markets, our ‘blue sky’ target price would be S$5.30, assuming that Wilmar FY09 results match its record FY08 profits of US$1.5bn, and the China profits are given a P/E multiple of 17x while the non-China profits trades at a P/E of 15x. The trough target price would be S$3.10, assuming that Wilmar trades at its historical P/B average of 1.8x.

Acquires access services business. AusGroup Ltd. is acquiring Modern Access Services, which provides access services to construction and maintenance programs in the mineral resources, oil and gas and industrial sectors. It has operations in Australia, Singapore, and Thailand. AusGroup's order book will increase from A$251m to A$455m after the acquisition. Costs A$15m to A$19.2m. AusGroup will pay A$15m in a combination of cash (A$10m) and new shares (A$5m). The cash payouts will be funded through a combination of existing cash (A$21.4m as of 31st March) and debt facilities. Additional amounts may be payable subject to Modern Access meeting certain EBIT milestones over FY10-FY12 of up to A$4.2m up to a maximum of A$19.2m.

No track record but large order book. Earnings data for Modern Access is limited and stale. For FY08, Modern Access generated revenue of A$0.3m, and incurred a loss before tax of A$1m and loss after tax of A$0.7m. As at 30 June 2008, Modern Access's NTA is A$3.3m. We estimate that AusGroup is paying between 2.7x to 5.8x FY08 NTA for the company. Note that Modern Access was incorporated in January 2008, so these figures reflect less than six months of operation as essentially a start-up. With no real track record, we believe AusGroup is paying for the target's A$203m order book, its management, and a client base that includes Woodside, Exxon Mobil and MCC Mining.

Revising estimates. We have adjusted our earnings estimates based on the maximum 14.4m shares issuable. We estimate that Modern Access contributes about A$58m (29% of its order book) to FY10F revenue at a NPM of 3.6% (versus our 4% NPM estimate for the existing business). Success TBD. Several key uncertainties exist. The target's limited track record is offset in part by a large order book and blue-chip clientele. AusGroup's own acquisition track record is choppier. The 2006 buy Cactus Engineering has been a disappointment (in our opinion) with orders and performance below expectations. AusGroup's new management has enjoyed some success in overhauling the company's execution capabilities and perhaps it is unfair to judge them on past deeds. Still, that overhaul is a long-term work in progress and there are execution risks for new business. Our S$0.51 fair value estimate (prev. S$0.55) is pegged at 11x FY10 earnings - down from 13x previously to reflect increased execution risks. Maintain HOLD.

Petra's 1Q09 net profit of US$4.3m (+49% yoy) was in line with our expectations, forming 20% of our full-year estimate and 23% of consensus. The improvement was led by higher ASPs for CI non-Europe operations, growth in the branded consumer division, and the end of hedge charges for the CI segment. We are maintaining our FY09-11 EPS forecasts. Taking into account receding risk aversion in the market and peer valuations, our target price has been raised to S$0.58, based on 8x CY10 P/E (from S$0.40, 6x CY10P/E). However, downgrade to Underperform from Neutral due to downside potential to our target price.

Reporting 1Q09 profit from successful cost cutting measures. Headline net profit of S$5.2m (-66% y-o-y, + >100% q-o-q) was ahead of consensus and our expectations. This was mainly due to the successful cost cutting measures instituted by the group, shaving off an estimated S$15m from its cost base. While EBITDA margin of 28% was lower on year, it was a marked improvement when compared sequentially.

Improved showing from hotel investment segment an encouraging sign. While Banyan Tree's owned resorts posted a 25% yoy decline to S$58m, performance was actually higher on quarter, led by increased occupancies on a group wide basis. RevPAR improved by 8% sequentially to S$215. Its Thailand operations, with a reprieve from the political unrest in Thailand, grew 11% to S$41.7m.

Entering low season. As the group enters the low season, forward bookings for Thailand and non-Thailand hotels remained lower at -28% and ?2% respectively. While we currently forecast the group to slip back slightly into the red in 2Q09, largely from lower hotel revenues due to the state of emergency that was declared back in April in Bangkok, we remain confident that the group should post an improved 2H09 performance, led by a seasonally stronger 4Q to end the year in the black. We raise our operating margins to reflect improved operational performance at its hotel segment.

Upgrade to HOLD, TP S$0.53. Notwithstanding short term operationally challenges, we like the long-term growth plans the group has in place over the next 4 years. Upgrade to HOLD, TP S$0.53 based on SOTP. This is based on 11x EV/EBITDA on its hotel business, which is pegged to its historical average trading range and 20% its international hotel peers. Catalyst for a re-rating will hinge an improved political outlook in Thailand, leading to sustained occupancies through current low season.

Olam reported 3QFY09 net profit of S$87.0m, up 56% YoY. Excluding the one-time gain of S$24.6m from buy-back of convertible bonds, net profit would have risen 12% YoY, in line with our expectations.

Food volumes expanded well. Volume expanded 14.8% YoY to 4.3m metric tons for 9MFY09, reflecting continued growth for the business. The food category recorded a 18.5% YoY tonnage growth, whereas the fibre & wood products segment recorded a marginal 1.2% growth. This points to the resilience of the food business even in times of economic recession. However, some signs of de-stocking have surfaced for the cocoa business, and this may augur weakness for the food business going ahead.

9MFY09 gross contribution (GC) rose 14.5% to S$573m. This was driven by growth across all segments except Fibre & Wood. GC per ton remained at S$133/ton. 9MFY09 net contribution (NC) also expanded 12.2%, with Fibre & Wood being the underperformer.

Net debt to equity fell from 3.17x (Jun 08) to 2.51x. Adjusting for stocks and debtors (which are liquid in nature), net debt to equity will fall to 0.83x, which is not excessive. Although overall volume growth remains strong, we are concerned that the fibre & wood segment weakness in NC may persist as we progress through the recession. This may also cap the overall NC per ton.

Downgrade from BUY to NEUTRAL. We raise our FY09 net profit forecast by 4% to S$262.3m, primarily due to the one-time gains recorded in 3QFY09, but partly offset by slower core business. Our FY10 net profit forecast has been cut by 7% to S$215.3m to factor in weaker demand. Target price remains unchanged at S$1.83. Given the recent surge in Olam share price, we therefore downgrade Olam from BUY to NEUTRAL.

Two investment companies controlled by Malaysia's Lim family were in the market last night attempting to divest their direct 9% stake in Genting Singapore, a Singapore-listed subsidiary of the Genting Berhad group. Genting Singapore is involved in international casino operations and the development of integrated resorts, including a new casino resort on Singapore's Sentosa Island, which is due to open in the first quarter of next year.

The 853.88 million shares were offered in a range between S$0.72 and S$0.76 and late last night the indication was that the price would be fixed at the bottom for a total deal size of S$614.8 million ($425 million). However, the deal wasn't launched until 8.30pm Hong Kong time yesterday and, at the request of a number of Asian investors, sources said the bookrunners had agreed to open the books for a short while before the start of trading this morning to give those who were unable to make an investment decision last night a second chance.

The price range corresponded to a discount range of 12.1% to 16.8% versus yesterday's close, which at first glance looks well wide of where most other recent Asian placements have priced. However, the share price has rallied 18.5% over the past three trading sessions, which means investors may have needed the additional incentive to invest at current levels.

This was confirmed two weeks ago in connection with Genting Singapore's first quarter earnings release, when the management said that it will deliver the Sentosa resort on time and on budget. It also stressed that there is no need to raise more money for this project. This is in sharp contrast to some of its larger rivals like Sands and MGM, which are already laden with debt and have been forced to delay projects because of difficulty in securing the necessary funding. In fact, market talk has it that MGM is looking to sell its 50% stake in MGM Grand Macau and Genting may be a potential buyer.

For full article refer to: http://www.financeasia.com/article.aspx?CIaNID=104178

1Q09 core net profit S$8m was in line expectations, forming 24% and 30% of the street's full year estimates. The quarter saw healthy good presale proceeds blemished by weaker construction revenues. Outstanding order book in 1Q09 stood at S$741m, some 25% lower than management's yearly projected target of S$1bn. Overall, revenue improved by S$15m yoy to S$149m. Balance sheet manageable as UE received proceeds from the CBs with net gearing manageable at 0.66x. We adjust our FY09-11 core EPS -28% to +5% on changes to our recognition schedule. We also raise our target FY10 PE for its construction business from 2x to 8x. End CY09 RNAV is lifted from S$2.21 to S$2.33 as a result. Target price, still based on 20% discount to RNAV, is raised from S$2.53 to S$1.87. Trading at 0.4x P/BV, we continue to see good asset based value in the stock. Maintain Outperform.

Olam International Ltd - Boosted by S$18m derivative gain

3Q09 core net profit of S$62.4m (+12%yoy) was in line with expectations, forming 34% of our FY09 core net profit estimates and 33% of consensus, boosted by an S$18m gain from derivatives, which according to management arose from ineffective hedges. Reported net profit of S$87m also includes an exceptional gain of S$25m from the CB buyback. Food product volumes grew between 8-16% while fibre and wood product sales volume dived 16%, and net contribution/tonne fell to S$89 from S$102. Core EPS estimates remain intact. Slowing price declines and price rebounds suggests that the worst is likely past. We lift our target price to S$1.20, based on 8.5x CY10 P/E (from S$0.97, 6.4x CY10 P/E). We assign a 15% discount to peer valuations due to Olam's high gearing, poor cashflow and smaller operations. Potential fund raising is one of our concerns. Maintain Underperform.

Wilmar International Ltd - Solid 1Q

Wilmar's 1Q09 results were above market and our expectations, making up 32% and 39% of the respective full-year estimates. The outperformance was made possible by better-than-expected pretax margins from its merchandising and processing as well as consumer products segments. The group is evaluating the feasibility of listing its China operations in Hong Kong or Shanghai to further unlock shareholders' value. We view this positively as it would help to lift valuations. We are raising our earnings forecasts for FY09-11 by 14-17% to account for the better-than-expected 1Q and higher processing margins for its downstream division. Our target price has been upgraded to S$5.30 from S$4.20 to account for our earnings upgrade and a higher forward P/E target of 18x (from 16x) in view of its plan to list its China operations in Hong Kong or Shanghai. Maintain Outperform.

Indofood Agri Resources - Key takeaways from roadshow

We recently organised a 1-day non-deal road show for Indofood Agri in Singapore, following the release of its 1Q09 results. Investors' response was strong, reflecting keen interest in the company and the plantation sector. Overall, we are more positive on IndoAgri following the roadshow for the following reasons: 1) the group is a prime beneficiary of the recent rise in CPO prices as it is selling most of its products on a spot basis; 2) it is set to enjoy lower fertiliser costs in 2Q09 ahead of most of its peers due to lower carried-forward stock; 3) efforts to improve its downstream sales and margins have yielded positive results; and 4) refinancing risks for its debt have eased in view of rising CPO prices and higher investor risk appetite. However, we are keeping our earnings forecasts intact due to unchanged CPO price assumptions. There is no change to our Trading Buy rating and target price of S$1.26, based on an unchanged forward P/E of 12x. We continue to like Indofood Agri for its strong management, attractive P/E valuation of only 10.4x against the sector's average of 12.8x and potential cost-savings from its merger with London Sumatra which should become more evident in the later part of this year.

Upgrading to Mainboard on 12 May 2009 – PSL has recently announced that it had received in-principle approval from the Singapore Exchange Securities Trading Limited for its upgrading to the Mainboard and it will be making the transfer with effect from 12 May 2009.

Clinched foundation engineering contracts amounting to approximately S$29m, most of which will be completed within this year. One of the contracts was clinched by PSL’s joint venture company to provide bored piling works for the construction of the Marina Coastal Expressway (“MCE”) worth approximately S$20m/year for the next 2 years.

Maintain earnings forecast – Given that the contracts clinched to date have met 75% of our segmental revenue forecast for PSL’s FY09F Piling & Engineering segment, we keep our earnings forecast for now.

Maintain BUY recommendation; Target price lifted to S$0.19. We continue to value PSL using P/B valuation metric. However, we raise our parameter to 0.75x FY09F P/B (previously 0.5x FY09F P/B) on improved broad market sentiments, deriving our target price of S$0.19, equivalent to 4.5x FY09F P/E. With upside potential of 35%, we maintain our BUY recommendation on PSL.

Keppel Corp is selling its entire 45.51% stake in SPC at S$6.25 or S$1.47bn in total. As a result, we have raised our FY09 earnings forecast by 51% to S$1.6bn to account for the divestment gain of S$660m upon the completion of the deal by Jul 09. We have cut our FY10-11 forecasts by 9-10% to reflect loss of earnings contributions from SPC. We lift our target price from S$6.30 to S$7.20, incorporating the offer price for SPC, marked-to-market adjustments for Keppel's listed entities and higher P/E targets for the offshore & marine business. We maintain our Underperform rating given limited upside potential.

Sold to PetroChina for S$1.47b. Last evening, Keppel Corp (Keppel) announced that it had entered into a conditional agreement with PetroChina Company Limited to sell its entire shareholding in Singapore Petroleum Company (SPC). This represented 45.51% of the total issued share capital of SPC for a cash consideration of S$6.25/share, equivalent to S$1.47b to be paid in full on completion. The offer price of S$6.25/share is a 24% premium to SPC's last closing price of S$5.04/share.

We think PetroChina willingness to pay this premium lies in SPC's 50% stake in Singapore Refining Company. SPC jointly owns the 290,000 bbl/day SRC plant with Caltex, and is an industry player with more than 30 years of extensive refining and marketing network especially in the Southeast Asia region. We think PetroChina's acquisition at this premium is largely due to its willingness to price a higher intrinsic value for SPC's refining business. Based on our calculations, the cash consideration of S$6.25/share implies PetroChina has factored in near-term refining margin assumptions of US$6.30/bbl and US$6.50/bbl for FY09 and FY10 respectively, and long-term China refining margin of US$6.00/bbl.

We urge investors to accept PetroChina's Mandatory General Offer for the remaining shares of SPC. According to the press release issued by PetroChina yesterday, PetroChina would be intending to make a Mandatory General Offer for the remaining shares of SPC upon completion of the acquisition, but this is subjected to Chinese regulatory approvals. Supported by the central government in its aim to improve the country's oil self-sufficiency, we believe PetroChina is likely to get the green light from the Chinese government. Hence, we urge investors to accept the offer.

Yongnam's 1Q09 net profit of S$9.9m (+104% yoy) was 2.6% above our annualised estimate and 11% above consensus, constituting 26% of our FY09 forecast. Yongnam should remain busy with an order book of S$517m as at end-Mar 09. We raise our net profit forecasts for FY09-11 by 5-16% to reflect strong the order-book growth, given the Singapore government's aggressive infrastructure spending. With receding risk aversion, we switch our valuation methodology to P/E from P/BV. We peg a 10x CY10 P/E target, at the low end of Yongnam's mid-cycle multiples, and translating to a new target price of S$0.28 (previously S$0.12, 0.8x CY09 P/BV).

Wheelock Properties - Cleaning out the lemons

Wheelock's 1Q09 core net profit of S$33m forms only 17% our full-year forecast and 20% of consensus as recognition of Scotts Square fell short. 1Q09 revenue grew 31% yoy to S$85m on recognition of presales and higher passing commercial rents. Wheelock continued to have net cash of 42cts/share, despite write-downs of S$23m for investments in HPL and SC Global. We adjust our FY09-11 core EPS estimates by -14% to +15% as we factor in a later sales schedule for Scotts Square. Our end-CY09 RNAV has been lifted from S$1.86 to S$1.94 on higher valuations for HPL and SC Global. Our target price, still pegged at a 20% discount to RNAV, rises from S$1.49 to S$1.55. Maintain Outperform.

Ho Bee Investments - Presales beginning to stream in

1Q09 core net profit of S$4.7m came in within expectations, forming 13% of our full year. The quarter saw strong presales from two completed projects, pushing total revenue up by 17% yoy to S$110m. We expect stronger recognitions in the remainder of FY09 as The Coast, Orange Grove Residences and Paradise Island are scheduled to complete by 3Q09. Net gearing should also fall significantly from 1.16x currently. Commercial rents were up yoy in 1Q09 but hotel revenues disappointed on falling occupancy. We lower our FY09-11 core EPS by 0-20% on lower ASPs. Our end-CY09 RNAV is lowered from S$1.26 to S$1.11. The stock continues to trade at trough valuations of 0.4x P/BV. With balance sheet outlook improving, we think trough multiples for the stock is not justified at this point. . We lower our valuation discount from 50% to 30% and raise our target price from S$0.63 to S$0.78. Maintain Outperform.

City Developments Ltd - Tough times for hotels; rich valuations

CityDev's 1Q09 core net profit of S$82m forms only 19% and 18% of our full-year and consensus forecasts respectively. Revenue fell 18% yoy to S$623m as property developments and hotels disappointed. We expect sales proceeds from The Arte and Livia to lift residential income in FY09. Revenue and PBT for hotels fell by 24% and 60% to S$344m and S$21m respectively. Shrinking global demand could continue to affect hotels. That said, a strong balance sheet remains a positive. We lower our FY09-11 core EPS estimates by 6-10% on lower hotel and associate income assumptions. We lower our cap rate assumptions from 6.5% to 6% and reflect a higher M&C share price in our model. Our end-CY09 RNAV and target price (parity to RNAV) have been lifted from S$5.92 to S$6.81 as a result. Following its recent rally, the stock has run ahead of fundamentals, in our opinion. Maintain Underperform on valuations.

Strong results aided by revaluation gain. Soilbuild Group reported a good set of 1Q09 results that was partly aided by revaluation gains. Revenue jumped 104.3% YoY to S$64.7m, with revenue coming from its 4 residential projects - Espa (TOP in Jan), Leonie Parc View, Montebleu and Centrio, development of Tuas Lot and rental income from newly completed projects. In particular, maiden contributions from the leasing of Tuas Connection and Penjuru Logistics Hub (PLH) had drove Soilbuild's rental income higher by 38% YoY in 1Q09. A one-off revaluation gain of S$6.5m was also recognized from the revaluation of PLH which was completed in Jan. As a result, PATMI jumped 207.5% YoY to S$19.1m. Excluding the revaluation gain, underlying PATMI still remains strong, growing by an estimated 90.3% YoY.

Higher NAV reduces gearing level. Debt level remains stable at the end of 1Q09, standing at S$410.1m (end FY08: S$406.7m). However, as NAV increased by 7.5% QoQ to S$0.99 per share at the end of 1Q09, Soilbuild's net gearing level continued to decline, falling from 1.9x to 1.7x. While revaluation gains had been instrumental in driving Soilbuild's NAV higher, bulk of the revaluation gain had been derived from the value-add that Soilbuild provided from the development of the properties, rather than from change in market value of the properties. As such, we believe that Soilbuild's NAV still remains defensive in light of the weak property market.

New project achieved encouraging take-up. For the year to date, Soilbuild launched 1 new residential project - The Mezzo, which is a 127 residential units and commercial development project located at Balestier Road. Although, average selling price of ~S$900 psf fell below our estimated S$1,000 psf for the project but take-up rate for the project has so far been encouraging. According to URA's March data, out of the 20 units launched in March, 17 units were sold, translating to a take-up rate of 85%. For Soilbuild's remaining projects - Heritage 9 and Meier Suites, the design development for these 2 projects have already been completed.

Downgrading to HOLD on valuation grounds. Our RNAV estimate has now been lowered to S$1.55 per share (previously S$1.58), after lowering our selling price assumption for The Mezzo. Maintaining a 50% discount to RNAV, our fair value estimate has now been lowered to S$0.77 (previously S$0.79). While current share price still implies an upside potential of 24.8%, we are now downgrading Soilbuild to HOLD, in line with our rating policy for small-cap stocks.

STXPO announced yesterday that it will convene an extraordinary general meeting on 5 June to seek approval for the issue of new shares and/or convertible securities. The size of the new issue of shares cannot exceed 50% of the total outstanding share base, with a minimum of 30% to be granted to existing shareholders on a pro-rata basis, and a maximum of 20% to be granted on a placement basis. In our opinion, STXPO may be preparing for a possible rights issue and/or private placement in the coming weeks. Half of 2010 and virtually all of 2011 capex remains unfunded. Maintain UNDERPERFORM and SOP target price of S$8; earnings under review. We believe that further share price upside is limited and investors should take profit. We are also concerned about the dilution of a potential rights issue. Also, we think that the Baltic Dry Index is ripe for a pullback.

Hotel Royal's result came in within expectation with top line growing 0.8% YoY to S$8.5m. Gross profit was depressed due to incorporation of Penang operations, which is currently under turnaround make-over.

Similarly, administrative expenses were also increased significantly by about 45.8% YoY due to its Penang operation. This was partially offset by lower finance cost on reduced refinancing rate and lesser fair value loss on its trading portfolio.

Overall, the Group managed to book a net profit of S$1.7m, representing a YoY increase of 3.8%. Operating cash flow continues to remain positive which speaks of the stability of the Group.

On its outlook, we feel that Hotel Royal will continue to face headwind for FY09 as the global economy has yet to show convincing signs of recovery hence dampening travelling mood. On top of that, the recent development of H1N1 flu virus may further deteriorate the already muted travel industry.

We maintain our earnings forecast and RNAV estimate of S$3.96 but increase our target price due to changes in market illiquidity discount from the previous 55% to current 40%. New target price stands at S$2.38. Maintain HOLD.

Soft 3Q09 in a challenging industry. SSH Corporation (SSH) reported a 14% YoY fall in 3Q09 revenue to S$53.5m as the group continued to feel the impact from the economic downturn. Net profit fell 69% YoY to S$2.1m, lower than expected, with gross profit margins affected by a provision for inventories write-down of S$2.7m and higher other operating expenses arising from provision for impairment loss on leasehold property and foreign exchange losses. Gross profit margin for 3Q09 was 22%, lower as compared to 26% in 3Q08. Peers in the same industry have similarly been affected by the challenging business conditions with companies such as Hupsteel expecting to report a loss in its upcoming results and Asia Enterprises posting a 66% YoY fall in net profit for the past quarter.

Industry outlook remains bleak. From what we gather, steel distributors and end-users are likely to continue de-stocking amid scarce signs of a sustained recovery. Steel prices may also experience more downside risk if iron ore prices continue its downtrend in the face of weak demand. Steel demand in most sectors, (with the exception of the infrastructure industry aided by government expenditure), has to stabilize first, probably in the later part of this year, depending on a myriad of factors such as the efficacy of government stimulus packages worldwide, consumer sentiments, corporate investments and bank lending activities. SSH also said that the global economic slowdown has resulted in several projects being deferred amid softer prices for steel. The group's revenue has been affected mainly by lower steel prices and lower demand for its products.

Maintain HOLD. This latest set of results is a reflection of general business conditions across the industry, as seen by results of SSH's peers. If we were to exclude the provision for inventory write-down and property impairment, net profit would have been S$5.4m instead of S$2.1m. The group expects the rest of FY09 to remain challenging, which is the consensus view among most industry players. We are revising our earnings estimates downwards with the lower than expected results and now peg our fair value to 0.6x FY10F NTA (in line with peers) with lower earnings visibility and also fewer available consensus EPS estimates for the group's peers. As such our fair value is raised to S$0.16 (prev S$0.11). Maintain HOLD.

Ho Bee Q1 profit up 43%

Ho Bee Investment's first-quarter earnings climbed 43 per cent to $37.3 million, from $26.1 million a year earlier, as it recognised revenue from residential projects completed in the first three months of the year. Turnover for Q1 2009 rose 17 per cent to $110 million, from $94.2 million in Q1 2008. The bulk came from property development, where revenue rose 18 per cent year-on-year to $104 million. Ho Bee said the increase was mainly due to the higher revenue recognition for two residential projects - Vertis and Quinterra, which obtained temporary occupation permits (TOPs) in January and March 2009 respectively. Ho Bee executive director Ong Chong Hua said payment has been received from almost all buyers of units in Vertis and Quinterra.

Ho Bee's The Coast obtained TOP in April, and payment notices are being sent out in batches. So far, the company has not had any problem collecting payments for The Coast, Mr Ong said. 'Cashflow-wise we are good, and in terms of the outlook, we should also be good, as we will recognise revenue from the projects we have sold,' he said. Q2 earnings will be underpinned by The Coast, as well as Paradise Island and Orange Grove Residences, which will soon receive TOP. Ho Bee has several projects ready for launch, but said it will continue to monitor the market and review its pricing strategy before making any decisions.

Soilbuild posts three-fold rise in Q1 earnings

Soilbuild Group yesterday reported net profit attributable to shareholders of $19.11 million for the first quarter ended March 31, 2009 - more than three times the $6.21 million it earned a year earlier. Revenue jumped 104 per cent to $64.7 million. Property development provided a strong boost, with $61.45 million recognised from business space factories and four residential projects. This was more than twice the amount recognised in Q1 last year. Property rental revenue grew 38 per cent from a year ago to $3.1 million. There were contributions from two new business space properties, and higher contributions from existing investment properties.

1Q09 results largely in line with expectations ? Net profit rose 53.5% to S$12.4m in 1Q09, largely contributed from progressive recognition of its joint development projects, CityVista Residences (~30% completed at 1Q09) and The Parc (~50% completed at 1Q09) which resulted in a 89.9% increase in share of profits from associated companies to S$14.8m. Grange Infinite, 20% completed at 1Q09, is expected to contribute in coming quarters. We believe Chip Eng Seng is on track to meet our expected completion of 60%, 70% & 60% for CityVista Residences, The Parc and Grange Infinite respectively.

The Suites@Central development update ? The Suites@Central, a 157-unit freehold condominium, is a joint development by Keppel Land (60% stake) and Chip Eng Seng (40% stake). It was recently announced that an en-bloc purchaser, who purchased 51 units on deferred payment scheme, was granted an extension of six months to arrange funds for payment on the condition that the purchaser pays S$0.5m/month during the extension period. The first S$0.5m payment has been made. The Suites@Central was recently transaction at S$1,500~1,535 psf in April 09. It was also reported on Business Times on 12th April that a development next to The Suites@Central, Illuminaire was 96% sold, achieved an ASP of S$1,700 psf. Given that 20% of the purchase price (S$1,806 psf) had been paid by the buyer, with the remaining balance of S$1,445 psf due for collection, we do not expect the JV to sell the 51 units at a price that is significantly lower than S$1,445 psf if the buyer default in payment eventually.

Earnings estimates largely unchanged ? We increase our construction gross profit margin assumption by 2.0% on stabilization of construction cost, bringing our gross profit to S$7.9m. However, we also raise our operating expense forecast to S$18.1, to account for the S$2.1m management and structuring fee for the S$60m bridging loan, lifting our FY09F bottom line forecast by 2.0% to S$68.1m.

Downgrade to HOLD; TP maintained at S$0.30. We are keeping our valuation method unchanged, maintaining 40% discount factor to our SOTP valuation, in line with the discount applied to other property stocks under coverage. We raise our target price slightly to S$0.30, mainly due to higher construction income resulting from higher construction margin. While we continue to like Chip Eng Seng, we believe that the stock is fully valued at current level. The recent rally has lifted Chip Eng Seng's stock price by 155% since 9 th Mar, outperforming STI index which has risen by 50% during the same period. Downgrade to HOLD. Risk to our recommendation includes extended market rally which may lift the share price to a higher level.

Parkway’s Singapore hospital revenue was down 9.3% y-y and 5.3% q-q, largely due to the 3.7% decline in inpatient admissions and weaker revenue intensity (-2.8%). This was mitigated by the strong 8.8% growth in outpatient volume. The extent of admissions decline and outpatient growth is better than our expectations — we are forecasting an 8% decline in admissions and 3% growth in day cases, but margins disappointed slightly due to the higher mix of day cases (low margins) and less foreign patients (high revenue intensity).

Local patient volume recorded marginal growth of 4%, which we think confirms the resilience of private healthcare in the current recession as there is minimal evidence of locals switching to subsidised care so far. Management also guided that foreign patient flow was sluggish in January and February, but has picked up since March. As such, we think both volume and margins are likely to pick up from here, barring any escalation of the H1N1 virus.

Parkway’s regional network of hospitals in SE Asia — Pantai in Malaysia and the cardiac centre in Brunei — performed exceptionally well despite the downturn. Revenue increased 25.8% y-y, driven by a 10.4% increase in total admissions and an 8.8% increase in overall revenue intensity. In our view, the strong performance of Pantai validates the potential of private healthcare in Malaysia. It should augur well for Pantai’s expansion plans in Malaysia, especially with Parkway’s operational expertise and Khazanah’s network. The international healthcare segment has also posted strong results, with top-line growth of 11.4% y-y and EBITDA margin expansion by 1.9pp, due to strong contributions from Parkway’s World Link Group of clinics in China, and cost-cutting measures.

Parkway’s share price has largely lagged the market year-to-date due to concerns on the negative impact of the recession on admissions and the lack of visibility on the Novena medical suite sale. Even in the recent market rally when it was finally catching up with the market, it was sold down by index funds due to its impending exclusion in the MSCI Singapore index announced on 14 May. In our view, Parkway’s long-term fundamentals remain intact and the technical correction presents an attractive opportunity to invest in a quality regional healthcare provider as a proxy to Asia’s growing demand for private healthcare. We reiterate our BUY rating with a price target of S$1.85, implying 43.4% potential upside.

Performance came within expectation, but outlook seems better than expected. Pre-sales revenue as at 27 April 2009 stands at S$386m with only S$71m recognized thus far in 1Q09.

Revenue grew 62.8% YoY backed strongly by progressive recognition of sold units from S$23.4m to S$38.1m in 1Q09. Contribution from hotel segment declined within expectation by 15% YoY. We are convinced that our low forecast on Roxy’s hotel segment is on the right track, especially under current uncertain global epidemic condition of the H1N1 flu virus.

Overall operating expenses were well-contained and in line with our forecast. Roxy managed to reduce its finance cost due to lower bank borrowing on TOP of projects. Consequently, net profit grew 53.4% YoY to S$6.4m.

Base on latest update by Roxy, sales from Nova 48, Nova 88, The Lucent, The Florentine and The Ambra came in exceptionally well. According to our forecast, sales value psf were mostly highly above cost.

Though no forecast adjustment at this stage, we believe that upward revision is likely should property market stabilize in next few quarters. Our valuation on Roxy is on the conservative side but that said, our RNAV of S$0.51 with a 40% discount for illiquidity gives the stock a potential upside of 34.8%. We feel that Roxy is stable with strong growth prospect and reiterate BUY with target price of S$0.31.

Breadtalk’s 1Q09 earnings turned around to a profit of $2.1m from $0.3m loss in 1Q08. Results met our expectations. Operating profit almost tripled driven by broad-based double-digit revenue growth across all business and geographical segments despite the severe recession. The successful turned around of its Hong Kong food court business and the disposal of loss-making J Co. Donuts business lifted its profits.

The overall bakery business recorded an operating profit of $1m largely due to the turnaround of the Singapore bakery operations and lower raw material costs. The restaurants’ operating profits were slightly lower yoy at $0.6m due to an impairment loss at the Station Kitchen and start-up cost for the Carl’s Junior business. Operating profits from food courts surged 3 fold to $1.3m led by the turnaround in the Hong Kong food courts. Its retail network continues to grow along with new store additions.

The improvement in its operating margins from 1.8% to 5.7% reflects better cost efficiencies through its cost management program and enlarged network. Savings were achieved in certain head office costs. Distribution and selling expenses and administrative expenses are well contained at 51% of revenue, an improvement from 54% a year ago.

Robust revenue was recorded across all geographical segments including the PRC (+34%), Hong Kong (+100%) and Singapore (+13%). Further, the group has recently awarded the Middle East Master Franchise to Pan Arabian Gourmet based in Bahrain. An opportunity to work with the Middle East market affirms the strong brand recognition in ‘BreadTalk’. The Middle East presents tremendous opportunities that will bring the group’s F&B presence to a global scale.

Breadtalk has proven once again that its good mix of F&B offerings supports its strong value proposition of being resilient under challenging business climate. Moreover, the stock has good growth prospects over the long haul underpinned by its F&B network expansion across the regions. Maintain BUY at a higher SOTP target price of $0.60 (implied FY09 PER of 16x).

Meiban's 1Q09 net profit of S$2.9m (-18% yoy) came in 7% ahead of our expectation due to a lower-than-expected effective tax rate and better-than-expected margins arising from good cost-control. 1Q09 numbers represent 34% of consensus and our full-year forecasts. We have raised our FY09 profit forecast by 42% to factor in the better-than-expected 1Q as well as improved order flows from HP. We have also raised our FY10 forecast by 5% after lowering sales and opex assumptions. Our target price has been lifted from 30.5cts (based on 0.7x CY09 P/BV, its 10-year average low) to 41cts (0.9x P/BV, closer to its 10-year average) to factor in the gradual improvement in earnings. Maintain Outperform. We suspect there could be upside surprises to FY09 dividend payment in view of its solid cash flow.

The group’s 1Q09 net profit rose by 8% yoy to $2.26m in 1Q08. Earnings look on track as 1Q tends to be seasonally weak. Turnover was lower due to the completion of a few large orders for fixtures exports in the previous period. Topline weakness was offset by higher corporate fee income, CPF job credit, forex gains, strengthening gross margins and lower taxes.

Despite lower revenue, gross margins improved from 25% to 26.9%. Improving margins reflect the group’s capability to assume higher value projects. Net margins improved as higher staff costs (+135 yoy) were mitigated by lower income taxes.

The group has secured contracts of approximately $167m as at 11th May 09, 38% higher from a year ago. $147m worth of contracts will be recognised this year, which have already made up 63% of our full year revenue forecast. Beyond 2010, the group will continue to be preoccupied with recurring orders from its blue-chip customers worldwide and MICE events regionally given its enlarged regional network.

The group has secured more projects relating to Universal Studio Singapore and is currently negotiating a few more projects. Numerous fit-out jobs that have been secured for branded boutiques at ION Orchard will be commencing very soon. There will be more fit-out jobs to come along with the two integrated resorts and new Orchard Road shopping malls scheduled for completion in 2009 and 2010. Meanwhile, the group is all set to execute the second F1 Singapore Grand Prix.

Kingsmen has been ‘recession proof’, still delivering fantastic earnings growth momentum. Its strengthening regional network also has shielded it against the downturn. At mere 5x FY09 PER, Kingsmen offers a good value proposition for a growing market leader in communications designs and production with good growth prospects. We project a dividend of 3 cents per share to be paid out this year. Maintain BUY with a SOTP target price of $0.85.

Singapore Airlines - Hedging and associate losses dampened earnings

SIA's full-year core net profit was 7% below forecast and 17% below consensus. 4Q09 pretax profit fell 95% yoy, on associate and fuel hedging losses. Lower yields and weaker load factors for both passenger and cargo caused revenue per unit of capacity to fall. A final tax-exempt DPS of 20 Scts was declared, below our forecast of 80 Scts. The positive surprise was a dividend-in-specie of SATS shares. Maintain TRADING SELL, although earnings estimates have been upgraded by 14-41% for a weaker US$ and our sum-of-the-parts target price has been lifted to S$9.60 (from S$7.60). Our previous target was based on an Asian-crisis P/BV multiple of 0.6x, but as the decline in forward bookings levels out, a higher 0.8x P/BV for the aviation business appears reasonable. To this, we add the realisable value of SATS based on our target price of S$1.37. Potential downside catalysts include continued weak demand and yields over the next year.

Singapore Airport Terminal Servs - Weak aviation outlook

SATS's 4Q09 net profit of S$42.2m (+37% yoy) was above our expectation of S$29m and consensus of S$28.5m, due to higher-than-expected contributions from SFI, a boost from the Jobs Credit Scheme (S$12.3m), and lower tax rates (7.3% vs. forecast 18.5%). A dividend of 6 Scts was declared, bringing full-year dividend to 10 Scts (6.5% yield). Topline grew 34% to S$326.5m as SFI contributed S$110.2m. Operating margins were flat at 14% while net margins declined to 12.9% from 19.7%. SATS also announced its contract renewal with key customer, SIA, for three years. Our FY10 EPS estimate has been raised by 19% to factor in the Jobs Credit Scheme and lower tax rates. Our target price has been raised to S$1.37, now based on 1x P/BV, from S$1.23 (previously sum-of-the-parts). Maintain Underperform on valuation grounds.

SIA Engineering Company Ltd - Still resilient

SIAE's 4Q09 net profit of S$66m (+21% yoy) was above our estimate and consensus thanks to stronger-than-expected revenue from line maintenance and fleet management (FMP). FY09 EBITDA margins inched up to 14.8% from 14.1% in FY08, due to better operating leverage from stronger revenue and a lack of special bonuses (as in FY08). Key weakness was lower-than-expected interest income due to a lower bank balance and lower interest rates. We raise our earnings estimates by 1-6% for FY10-11, to account for stronger FMP and line maintenance revenue. SIAE declared a lower FY09 DPS of 16 Scts for a payout of 67% (FY08: 80%). Maintain Outperform with a higher target price of S$2.97 (from S$2.40), still based on blended valuations but incorporating our earnings upgrade and a higher P/E target.

Comfortdelgro - Overtaken by cyclicals

CD's 1Q09 net profit of S$52.5m (+4.4% yoy) was in line with consensus and our annualised estimates (23-24% of FY09 estimates). Management guided that its performance should be maintained, although cautious in view of the downturn and potential further weakness of the A$ and ï¾£, and will further tighten costs and credit controls. Given receding risk aversion, defensive stocks like CD are unlikely to outperform the market. We have applied a 25% discount to our DCF valuation of S$1.84 to account for forex risks. We arrive at a new target price of S$1.37 (previously S$1.84), supported by a prospective CY09 dividend yield of 4.5%.

UOL's 1Q09 core net profit of S$48m forms only 20% of our full-year forecast and 18% of consensus. 1Q09 revenue rose 22% yoy to S$197m on stronger presales and higher rents, partially offset by weak hotels. Presales and higher passing rents should lift operating performance in FY09. Hotels could further disappoint on shrinking global demand. We adjust our FY09-11 core EPS estimates by -9% to 12%. We also lower our cap-rate assumptions and capture a higher UOB target price in our model. Our end-CY09 RNAV estimate has been raised from S$3.02 to S$3.33. The stock trades at 0.6x CY09 P/BV and a 20% discount to RNAV, reflecting mid-cycle valuations. With hotels expected to remain depressed and further downside expected for office rents in 2010, we look for larger valuation discounts before accumulating the stock. Our target price, now pegged at a 30% discount to RNAV (50% previously) on lower risk aversion, has been raised from S$1.51 to S$2.33. Maintain Underperform.

Margins normalized as expected. Pan-United's net profit dropped 16% yoy to S$9.9m in 1Q09 on lower ASPs. The ASPs for Ready-Mixed Concrete (RMC), the key product that accounts for c.70% of total sales, dipped by 6%-8% during the quarter, partly due to the lower raw material costs. As a result, overall net margin moderated by 2.4ppt to 7.7%. Nevertheless, sales volume for RMC has actually remained strong on the back of higher construction activities in Singapore.

Balance sheet remains healthy. Despite global credit crisis, Pan-United's average collection period has improved from 101 days in 2Q08 to 74 days in 1Q09. Current net gearing stays low at 12%. We expect the group's net gearing to increase to 22% in 2009, due to a significant capex of S$40m for shipping fleet expansion.

A beneficiary of government's expansionary budget. We are leaving our numbers intact for now given that 1Q09 earnings were in line, making up around 28% of our full year estimate. In terms of valuation, we are raising our PE multiple for BBM segment from 5x to 7x, in line with a 20% discount to the average valuation of its more established peers in Asia. As a consequence, our TP is lifted to S$0.65. Pan-United is well positioned to benefit from government's expansionary budget as we reckon >60% of its sales is derived from infrastructure related projects. With the stock offering decent yield of 5.5% and potential capital gain of 18%, we maintain BUY on Pan-United.

SMM’s subsidiary secured a S$230 mn contract to construct two offshore platforms in Gajah Baru Field, Indonesia. This brings SMM YTD total contract win to S$601 mn or 20% of our FY09 assumption (Fig 1). There is no material change to our estimates.

Separately, the court-appointed liquidators for Petroprod have formally declared the company to be insolvent. Petroprod’s CJ70 jack-up was to be delivered in 3Q10. The company owed US$149 mn to SMM. We have not removed Larsen group rigs from our estimates, by default giving SMM the full benefit of doubt.

Even with our above consensus earnings and new contract estimates, we are not able to justify SMM’s trading valuations. Excluding COSCO’s earnings, SMM O&M 2010E P/E is heading towards its up cycle period average, which appears aggressive to us.

New contract win accounts for 22% and 57% of our 2010-11E earnings. Additional earnings risks from COSCO Corp, contract cancellations and rig prices are not insubstantial. Valuation is well ahead of fundamentals here. We maintain our UNDERPERFORM rating.

DPU up 2% QoQ. Suntec REIT recorded a 2.3% QoQ and 16% YoY increase in 1Q09 revenue to S$64.9m. Unitholders get 2.918 S cents for the quarter (up 2% QoQ and 15.9% YoY). Results were better than expected, with Suntec's gross revenue and distributable income outperforming our 1Q estimates by about 4-7%.

Rents down but still incremental. An overhang of supply and uncertainty of demand are key concerns for the office sector. 3.7% of Suntec City office lies vacant, up from 1.8% a quarter ago. We understand that a couple of tenants are only renewing part of previously occupied space. The manager said maintaining occupancy above the 90% level is a key priority. Some 527k sf of office leases are up for renewal in FY09, with an average rent of S$5.33 psf pm. The manager has already renewed more than half of these, at around S$9.96 psf pm on average. The remaining 237.6k sf of office space expiring this year is currently earning an average rent of S$6.64 psf pm - we note the margin of safety between achieved rents (down 11% QoQ) and average rents on expiring leases (up 25%) has narrowed quite dramatically - but is still adequate, in our opinion.

S$825m facility in place. Suntec has secured a S$825m term loan facility to refinance the S$125m in MTN and S$700 in CMBS loans maturing this year. The deal, a seven-bank club loan facility, is structured as a S$725m 3-year loan and a S$100m 7-year fixed rate loan. The manager said the facility costs a blended all-in interest margin of less than 375 bps over the base rate (versus an all-in financing cost of 3.02% in 1Q09). The cost of debt is significantly higher, but a fair reflection of the current lending environment, in our view. This announcement clears one "elephant in the room" but it does not change our view on Suntec's potential need for an equity issue to address falling capital values.

We still see some value. Our SOTP value for Suntec is S$0.91, down 4% from S$0.95 due to minor adjustments. Our fair value estimate is unchanged at S$0.80, a 12% discount to our SOTP value. This incorporates our assumption of a S$500m equity issue at the S$0.60 level. Suntec is up 31% since our last report in March. We still see some room on the upside, with current price levels 21% below our fair value, along with a 14% FY09F yield (35% total return). Maintain BUY.

3Q09 registered a $16.5m loss. 3Q topline grew 1% y-o-y while bottomline registered a loss of $16.5m, largely arising from the allowance for the impairment of an associate company – Oriental Century. Below-expected results were due to higher operating expenses and slower than expected topline growth

No dividends declared. No dividends were declared, despite having the scrip dividend scheme in place. While some investors may not like this, we think this is an appropriate stance in view of its current debt position. Management shared that they target to be debt-free by end FY10F.

Trimmed forecasts by 10% - 26%. We trimmed our forecasts by -26% (FY09F), -13% (FY10F) and -10% (FY11F). This is largely on assumption of slower growth in students’ enrollment. The change in FY09F is larger as we take into account the allowance for impairment of the associate company.

Buy, TP: S$0.78. Our TP is unchanged at $0.78 as we roll over our valuation to FY10F, still based on 18x earnings, a discount to regional peers. Maintain Buy as we continue to see Raffles Ed continue to deliver on its growth plans, albeit slower (from a larger base) and its regional presence in the education space.

1Q09 net profit of Rmb 42.8m, down 70% yoy represented merely 5.3% and 5.4% of our and market FY09 forecast. Key discrepancies include (i) lower than expected HTMP, frozen pork and by-product sales, (ii) steeper than expected gross margin contraction (iii) higher than expected tax rate and (iv) higher operating expenses incurred for its pig farming project. Stripping out Rmb8.31m losses from its associate, profit from its core operation was Rmb 51m, still down by 64% yoy. This was disappointing as it reflects its lack of pricing power amidst stiffer competition. As hog prices continue to trend lower, we see continued earnings weakness. We have chopped our EPS estimates by 32.2-34.2% in FY09-11. Following the recent rally and the disappointing 1Q showing, we expect selling pressure on the stock. Downgrade from outperform to Underperform with a reduced target price of S$0.53 (S$0.85 prev.)

1Q ahead of expectations — Wilmar reported strong 1Q net profit of RM380m, which is better than our and market expectations. Net profit made up 35% of our and 33% of consensus full-year estimate. The better performance was due to improvement in margins especially at the palm & laurics and consumer products segment.

PBT for palm & laurics up 72% YoY — Sales volume for palm & laurics was down 15.5% to 3.9m metric tonnes (MT) due to more cautious risk management stance following industry defaults at end-2008. However, margins for this segment rose sharply from US$27/t in 1Q08 to US$55/t in 1Q09. This was due to the group’s ability to time its purchases of raw materials and sales of products well.

PBT for consumer products up 389% — Margins for this segment improved sharply to US$106/t in 1Q09 from US$18/t due to lower feedstock prices. Also, recall that margins in 1Q08 were affected by the Chinese Government’s price intervention measures. The measures were subsequently lifted in Dec 2008 when inflation was no longer a concern.

Evaluates listing of China operations — The group is evaluating the feasibility of listing its China operations in either Hong Kong or Shanghai. In FY08, China accounted for 49% of group revenue and 40% of group assets.

Although earnings fell 83% yoy to $0.7m, it was still above our expectations of $0.5m. Excluding a forex hedging loss of $0.4m, underlying earnings was $1.1m, down 74% yoy. We highlight that 1Q09 results form only 7% of our full year forecast as we expect subsequent quarters to show sequential improvement.

Revenue fell 30% yoy to $32.8m as no product segments were left unscathed by the economic slowdown. Office automation, consumer electronics, automotive and data storage revenue fell 40%, 34%, 25% and 23% respectively. Although data storage revenue fell, rubber sales were fairly robust, down 12% yoy as Armstrong had taken market share from a competitor in earlier quarters.

We expect 2Q to be better than 1Q, with the automotive and data storage segments likely to take the lead. China’s auto market has grown robustly in the past five months as sales were boosted by stimulus policies. Apr set a new sales record of 1.15m vehicles, up 25% yoy. Armstrong’s China auto business posted yoy growth in 1Q despite the slowdown elsewhere. Data storage should also respond to the pickup in consumer sentiment.

Balance sheet continued to be well managed. Net cash was $19.4m, stable on both a yoy and qoq basis, despite a slightly longer cash conversion cycle (1Q09: 122 days, 4Q08: 98 days).

We are maintaining our full year forecast of $10.5m as we expect sequential improvement for the next three quarters. Armstrong remains a well-run company with ample growth prospects once it gets through the current downturn. Our BUY recommendation stays, with a revised price target of $0.25, based on 12x FY09 P/E.

ST Engineering’s 1Q09 results were slightly below expectations, with net profit at S$85.2m sliding 30% versus 1Q08 and down 17% sequentially. On a PBT basis, however, STE managed to grow by 25% sequentially, as 4Q included a tax write-back. However, with a second consecutive quarter of muted earnings, we believe that STE is feeling the effects of the current difficult business conditions, particularly in Aerospace.

Group turnover was flat at S$1.3bn, with a shortfall in Aerospace and Land Systems compensated by Marine and Electronics. Aerospace EBIT margins at 9% were lower versus 12% in FY08, due to an unfavourable sales mix. All divisions saw some level of margin pressure, except for Land Systems, whose margins improved from lower operating expenses.

Management has maintained its guidance for the full year, and expects FY09 to show comparable turnover and PBT to FY08. Despite the weak quarter, STE has characterised the performance as within their projections, and expects a stronger second half, based on its order flows. We expect this to come from higher deliveries for its Passenger to Freight conversion programme, as well as commencement of Bronco deliveries to the UK Ministry of Defence.

STE grew its orderbook to S$11.0bn from S$10.6bn at end-FY08. STE will deliver about S$2.9bn of this in the next 3 quarters. This puts it on track to deliver our full year turnover estimate of S$5.4bn. However, we are cutting our margin assumption further for conservatism, and to bring our estimates closer towards STE’s own guidance. As a result, we are cutting PBT by 5.7% to S$545.5m, and net profit by 9.3% to S$436.1m.

STE still expects to pay out 100% of earnings as dividends. With our cut in forecast, we reduce our FY09 projected dividends from 16.1 cts per share to 14.5 cts. Coupled with STE’s 17% price rise over the last 2 months, FY09 dividend yield is 5.5%. We are downgrading our recommendation to Hold, with limited upside to our target price of S$2.70.

To cushion the impact of the sharp profit decline to only $42 mln in Q4 ended Mar’09 from $340 mln quarterly average for the first 9 months of the fiscal year, and $527.5 mln a year ago, SIA has proposed distribution of its entire 80.61% stake in SATS (870 mln shares) to its shareholders on the basis of 0.73 SATS share for every SIA share. With SATS last at $1.55, that works out to $1.13 distribution per SIA share, in addition to the final cash dividend of 20 cents per share, which is a quarter of the 80 cents paid last year.

SIA said the distribution is to enable it to concentrate on airline and aircraft maintenance, repair and overhaul (MRO) businesses (ie SIA’s 81% stake in SIA Engineering stays), while allowing SATS to lessen its dependence on the aviation business.

Based on $1061.5 mln profit for the year ended Mar’09, SIA’s historic PE is 13x. One of the reasons for the sharp profit decline in the fiscal year was the fuel hedging loss amounting to $543 mln.

The divestment of SATS by SIA came as a surprise, given management’s long-standing resistance to the idea of divesting SATS and SIA Engineering.

The free float of SATS will increase, which is positive. Temasek, which owns 54.53% of SIA, will end up with 43.8%% of SATS, which now incorporates Sing Food, where Temasek used to own 69.68% of and which was sold to SATS last year. (And which resulted in SATS’ cash position dwindling to $137 mln at end Mar’09 from $620 mln a year ago.)

While SIA has only recently renewed the (ground handling & catering) contract with SATS for another 5 years to Sept 2014, hence providing some comfort to shareholders of SATS, there is no denying that SATS’ future after that becomes blurred because of the uncertainties surrounding the reciprocity arrangements between SIA and other airlines of the world.

Meanwhile, speculation of who’s next, will likely shift to Keppel Corp, which we believe has stuff that is of no strategic importance, eg KT&T, whose key asset is the 20% stake in M1; K1, and even Keppel Land! (We would however rule out the likelihood of SembCorp Ind divesting its stake in Semb Marine.)

Therefore while SIA’s share price is likely recover, especially after yesterday’s 52-cent or 4.3% drop ahead of the results announcement, there is no reason to chase it just for the entitlement. Besides, the distribution should put some pressure on SATS. We remain Neutral on both SIA and SATS.

DPU recovers. LMIR Trust posted S$18.7m in 1Q gross revenue, down 8.1% YoY and 13% QoQ. Net property income fell 9.3% YoY to S$17.5m, but registered a 41.7% QoQ improvement as 4Q NPI was hit by a S$7m provision for receivables. 4Q results were also hit by a S$3.3m write-off of fees on an unused loan facility. Consequently, distributed income rose 351% QoQ to S$14.6m, while falling 13% YoY. LMIR will pay out 1.36 S cents for the quarter versus the 0.3 S cents paid out a quarter ago. This is equivalent to an annualized yield of 22.2% on the current share price. Results were better than expected.

Casual leasing still a problem. To recap, 4Q was plagued by a few key issues: expiry and early termination of leases as well as declining other income. Last quarter's provision was on outstanding rents from wholesaler tenants or third-party agents who earn revenue from sub-leases on atrium spaces/corridor leases. These wholesalers were in arrears and had also terminated their leases. These issues flowed through to 1Q revenue as well. The manager said it is moving away from wholesale tenants to dealing directly with casual tenants. We note LMIR still has another S$19.3m in receivables, or 19% of total FY08 revenue.

Rental market is tougher. Indonesia's central bank is projecting economic growth of 3-4% in 2009, compared to growth of 6.2% a year ago. The manager said that LMIR was achieving lower rental increases on lease renewals than it had forecasted at IPO. The manager guided that the rentaloutlook for 2009 is challenging, as "retail space demand is expected to weaken and competition among landlords to intensify". We note that portfolio occupancy has fallen two quarters in a row now, to 95% from 95.7% in December. This is still higher than the 83.1% industry average (Cushman & Wakefield). Mal Lippo Cikarang saw the biggest decline, with occupancy falling 700bps to 86.6% in a space of three months.

Issue with lender. The manager warned that there is some delay in arranging the correct documentation for its S$125m loan. It is currently asking its lender for an extension - which may result in a one year reduction in loan tenure and a restructuring fee of S$1.5m. LMIR is geared at 12.3%. We have adjusted our earnings estimates but will keep a close watch on earnings stability over the next few quarters, as well as outstanding receivables. We maintain our HOLD rating and S$0.24 fair value as we track these issues.

Initiate coverage with a HOLD at fair value estimate of S$0.85. From the last traded price of S$0.785, our target price shows an upward potential of 8.09%. On the back of cost pressures, greater competition for its international mail business and the presently weak economic backdrop, we initiate Singapore Post Limited with a HOLD call at a fair value estimate of S$0.85.

Lackluster Q4 results. Singpost announced a set of results that showed that it has not been spared from the current economic downturn. Revenue fell by 2.9% from S$119.05 million in Q4FY2007/2008 to S$115.57 million in Q4FY2008/2009. Stronger 1st half revenue was largely offset by the downturn in the 2nd half of the financial year. Underlying net profit fell by 3.2% for the quarter and net profit for the year fell by 0.3% to S$148.8 million. Operating expenses for the quarter fell by 6.3% due to government relief as well as cost control measures by the Group. The Group proposed a final dividend of 2.5 cents per share, if approved, would lead to a total annual payout of 6.25 cents per share.

Acquisition of G3 Worldwide. SingPost has fully acquired the remaining share capital of G3 Worldwide Aspac Pte Ltd (“G3AP”). It entered into a share swap agreement with TNT International Mail Holdings B.V. (“TNT”) where SingPost will acquire the remaining 50% issued share capital of G3AP in exchange for its 24.5% shareholding in G3 Worldwide Mail N.V. (“G3”) and the payment of EUR7.5 million to TNT. This acquisition allows SingPost to focus its efforts on creating a greater regional footprint in the Asia Pacific region, inline with its focus on regional expansion.

De-regulation of the Postal sector. From 1st April 2007, Singapore’s postal sector was liberalized. The Government decided to open the Basic Mail Services market, which includes the collection and delivery of letters and postcards, within, into and out of Singapore. Ending SingPost’s 15 years monopoly license. With this, new players will be allowed in both domestic and international mail services.

Terminal dues settlement reclassification. At the recently held 24th Universal Postal Union (“UPU”) Congress, it was decided that Singapore will be reclassified as a Target Country (previously known as “Industralised Country”) from the current category of Net Contributor Country for the purpose of terminal dues settlement, with effect from 1 January 2010. Terminal dues refer to settlements for the processing and delivery of international mail between countries. Singapore will have to apply the relevant terminal dues system from year 2010 to 2013 and contribute to the UPU Quality of Service Fund.

Solid 1Q09 with margin expansion. Headline net profit of S$22.6m beat our forecast of S$20m. Excluding provisions of S$9.1m and forex gain of S$3m, core profit would be S$28.6m, some 43% higher than expected. 1Q09 sales fell 10% y-o-y and 10% q-o-q to S$244m versus our forecast of S$228m. Apparently, continued ramp of Research In Motion (RIM) orders has enabled Hi-P to fare better than other handset component makers. The latter saw sales decline 20-30% on average. Notwithstanding lower revenue, gross margin expanded to 20.8%, compared to 20.3% in 4Q08 and an improvement over 18.1% in 1Q08, thanks to better product mix with more value-added processes, decrease in material costs and effective overall cost control.

Strengthening balance sheet. Hi-P continued to generate strong free cashflow of S$78m even though cash conversion stretched a little to 56 days from 46 days. Net cash rose to S$201m, accounting for 40% of market cap at end of Q1.

Going forward, Hi-P expects 2Q09 to be significantly lower than 2Q08, in line with our expectation. For 2Q09, our current forecast is for revenue and net profit to decline 27% yoy and 35% respectively, and down by 16% q-o-q and 21% q-o-q respectively. For the full year, we maintain our net profit forecast of S$79m, down 23% y-o-y, on revenue of S$903m. No change to TP of S$0.62 ( 7x 09 PER) and Buy recommendation.

1Q09 revenue and NPI were in line with our and consensus full-year forecasts, while DPU was below our below-consensus forecast, due mainly to higher-than-expected trust expenses (legal and professional fees) and a S$0.5 mn realised loss on AUD forward contract undertaken to manage forex income exposure.

Management further revalued downwards its portfolio of nine properties by 7.8% to S$1.53 bn to reflect deteriorating conditions. Gearing has risen from 54.4% to 58.3%, while interest coveragefell to 1.8x from 2.2x, though still meeting existing debt covenants.

We expect management to conclude refinancing of its S$620 mn debt due this year soon, while balance sheet strengthening may require some equity fund raising or convertible preference issue.

We cut FY09E income 2% on higher trust expenses, but raise FY10-11E income 3% from lower management fees on lower asset revaluations, and DDM-based target price to 18cts (from 16cts). While attractive at 20% FY09E yield and 0.2x P/B, we expect DPU to decline 46% to trough on falling rents and rising financing costs.

We are more positive on Wilmar following a post-results analysts' briefing yesterday where Wilmar explained the potential listing of its China operations, which could be completed in as short a time as six months. Wilmar also said there is potential upside to dividends as it may distribute part of the listing proceeds to shareholders. Assuming the group sells a 20% stake in its China operations based on 25x P/E, it could receive an estimated US$3bn. And assuming it distributes 50% as dividend, its shareholders stand to receive 34 Scts/share, based on our calculations. A listing could also lift Wilmar's valuations, we believe, as Hong Kong and China markets trade on higher P/E valuations vs. Singapore. A listing will moreover be positive for the longer-term growth prospects of its China operations. We are maintaining our earnings forecasts, target price of S$5.30 (18x P/E) and Outperform.

Suntec REIT announced 1Q09 DPU of 2.92 cents (+16% yoy, +2% qoq), slightly above expectations on the back of higher rental reversions. For the quarter, Suntec city office achieved rents of S$9.96 psfpm, down 11% qoq, for some 0.3mn sqft of expiring office space, though still +50% above expiring rates of S$6.64 psfpm. Of note is Suntec’s gradually falling occupancy, 97.4% for the REIT’s office space (down from 98.7% qoq), reflecting the weakening rental outlook. Results were lifted by Suntec’s S$825mn new term loan to refinance borrowings under MTN and CMBS (S$700mn due Dec 09). All-in interest margin of about 3.75% (existing CMBS below 3.0%) is well below recent refinancing tranches of 4.5%-5.0%. Suntec has no more debt maturing until 2011. Gearing is 34.4%.

Maintain Buy, as we view the refinancing as a near-term catalyst for the shares, as it removes the short-term cash call overhang the market appeared to expect. While we think a cash call is still possible, Suntec now has the time and flexibility (18-month window). While we remain cognizant of deteriorating fundamentals for commercial office (we expect prime office rents to fall to S$6.5 psfpm by 2010E), we still see value at current levels. A deeper read would be that the Singapore financial system remains relatively liquid and there are funds available for lending (especially those with good credit), although banks have become more selective in extending credit. Suntec is currently trading at an attractive yield of 14%/13% for FY09E/FY10E and 0.3X book. Maintain DCF-based 12-mo target price of S$0.88. Risk: Further macro deterioration weighing down on rents.

MCL said it has been informed by the lawyer of the Chinese buyer of all 25 units at The Fernhill, that the buyer has sold 19 of the 20 units it had failed to pay up for by the May 4th due date. The buyer will complete the sale in May, before the expiry of the 21-day grace period from May 4th.

The Chinese buyer had earlier sold 5 units, and if full payment is not made by May 25th, MCL would have the right to forfeit the initial 20% down payment, and to re-sell the units.

As noted in our Apr comments, MCL would have no trouble re-selling these 20 units; but it is still a relief 19 units have been sold, which would save MCL the hassle of looking for buyers.

Also note that MCL disclosed in the Q1 results that had full payment been made, it would have recognized US$39.3 mln revenue instead of the reported US$8.3 mln; and profit of US$10.7 mln instead of US$1.4 mln. This suggests that the 2007 / 2008 dividend payout of 10 Singapore cents per share can easily be repeated this year, which implies 4.9% yield with the stock at $1.22.

We last downgraded the stock (then at around $1.16) to Take Profit. In view of the current market upswing, we would raise our target-selling price to around $1.40, taking into account MCL’s only-average liquidity. NAV is $1.54 per share.

If not for tax rate having surged from 9+% a quarter and year ago to almost 18% in 1Q09 (due to expiry of tax exemption status of some subsidiaries in China and some provisions which are not tax deductible), bottom-line performance would have been exactly in line with management’s guidance (pretax profit of $27.3mln was flat qoq and yoy, in line with management’s guidance).

With solid working capital management, operating cash flow was a robust $85.2mln, up from $82.9mln last year and $43.9mln last quarter, more than sufficient to cover capex of $7.35mln and share buy back of $6.4mln, increasing cash holdings from $131.6mln to $205.9mln. After debts of $4.5mln, net cash amounts to $201.4mln, representing 40% of its market cap, down from 47% in Feb ’09. But what could disappoint the market is that management is guiding for much lower sales and profit in 2Q ‘09 versus last year’s $281.5mln and $27.1mln repectively, reflecting the global economic slowdown.

And management is also guiding for lower 2009performance due to the adverse market conditions.While this is not a surprise as the market was alreadyexpecting net profit to decline about 20% to $80mlnin 2009, there is a risk for further reduction givenmanagement’s downbeat 2Q ‘09 forecast, guidingfor much lower sales and profits.

With the stock having surged 87% since our upgrade to BUY in Feb ’09, coming close to an important technical resistance coupled with management’s downbeat 2Q ‘09 forecast, we are thus downgrading our call to a HOLD expecting its continued share buy back program, strong financial position and 0.8x price to book to provide support.

On a quarter-on-quarter basis, gross revenue for 1QFY09 was flat at $18.4 million (+4.5% y-o-y), net property income increased 6.6% to $16.1 million(+3.2% y-o-y), distributable income decreased 5.5% to $10.3 million(- 18.2% y-o-y). DPU for the quarter is 1.291 cents.

CIT’s gross revenue for 1QFY09 registered flat growth, which was in-line with expectations, given there wasn’t any catalyst to earnings. Portfolio occupancy remains at a high 99.2%. However distributable income fell 5.5% and DPU fell 6.0% mainly due to higher interest expense incurred on the new loan.

CIT refinanced its loan in Feb 2009 and has no refinancing worries for the next three years. The refinancing comes at substantially higher interest of 5.9% and is the main reason for the decrease in DPU. Our previous estimate was an interest cost of 5.0%. Current gearing is 39.9%.

Without the overhang of refinancing worry, the only concern is whether CIT can maintain its portfolio occupancy. We continue to assume a portfolio vacancy of 3%. Revenue growth is supported by fixed rental escalation built into leases. We tweaked our assumptions to account for lower property expenses due to government rebates and also higher interest expenses vs our previous assumptions. CIT is currently trading at 60% discount to NAV. We have a forecasted FY09F DPU of 4.73 cents, which translates to 16.6% dividend yield. We apply WACC of 11.4% and terminal growth of 1% to our DCF valuation. Fair value is raised from $0.27 to $0.31. We maintain our HOLD recommendation.

Results slightly ahead — For 1Q09, distributable DPU came in at 2.18cents, down 24%. Excluding the $1.7m retained for working capital purposes, DPU of 1.97cents was 28% of consensus FY09 estimate of 7.1cents and 33% of our estimate of 6cents. NPI was down 21%yoy largely due to the fall in RevPar.

SG Hotel performance — Compared to a year earlier, average occupancy for the Singapore Hotels fell from 84.4% to 74.8% while ARR fell 18.6% from $247 to $201. As a result, RevPar fell a hefty 27.7% to just $150 in 1Q09 compared to $208 last year. Novotel Clarke was the best performer with revenue falling just 10% yoy and Copthorne King the worst, falling 33%.

Secures $350m loan for refinancing — CDLHT has secured a new S$350m bank facility to refinance all of its S$297m borrowings, maturing in July 2009. The new 3-year facility consists of a S$270m term loan and a S$80m committed revolving credit facility. The interest rate for the new facility is the Singapore dollar swap offer rate plus interest margin of 2.60% per annum.

Maintain Sell, TP $0.48 — We have raised our earnings slightly to reflect the lower than expected interest cost. The current swine flu outbreak is adding more woes to the already weak hospitality sector. Operating environment is highly uncertain and we maintain our SELL recommendation on CDL H-REIT.

1Q2009 P&L marks the trough, start of an earnings upgrade cycle UOB and OCBC produced better than expected results: robust net interest margins, strong non-interest income, lower operating costs. In particular, while market was expecting major NPL/credit costs hikes, UOB and OCBC were sufficient to positively surprise the market. We think 1QFY09 could well mark the inflection point: Singapore banks’ strong preemptive provisioning track-record, and potential Singapore GDP trough in 1QFY09, may set earnings on the path to early recovery. We revise our 2009E-11E EPS estimates by -14% to +41%, and expect a wave of earnings upgrades as investors readjust expectations. With this report, David Ng assumes primary coverage of DBS, UOB, and OCBC.

(1) Recession costs remain manageable. Although we see NPLs doubling, the magnitude remains below the levels experienced during the Asian Financial Crisis, and Singapore banks have a stronger earnings buffer; (2) opportunities to increase market share as foreign banks pull back; (3) better NIM performance, improved loan pricing partly offsetting lower spreads from lower rates; and (4) robust capital position, no major recap needs.

Except for UOB, both DBS and OCBC are still trading below their 1996-2008 P/B median. Given Singapore banks’ stronger resilience, relative capitalization vs. regional peers, and attractive yields, we expect Singapore banks’ shares to close the gap, and return to their mid-point valuations. DBS remains our top pick in the sector, add to Conviction Buy (from Neutral), given its more undemanding valuations, and high dividend. With its enlarged balance sheet, it can aggressively gain market share as foreign banks pull back from Singapore, and grow exposure to Greater China, which is seeing some recovery. Reiterate Buy on OCBC, as we think market has not fully appreciated its earnings resilience. UOB remains at Neutral: though UOB’s solid 1QFY2009 results should ease concerns over recap/asset quality issues, we think the market will need further evidence of sustained growth recovery for further re-rating. We raise our TPs by 26%-50%.

Downgrade to Sell (3M), TP cut to S$0.80 – We have reduced our DPU estimates to reflect our latest view on the office sector following the 28% plunge in prime grade A office rental to S$10.75psf in 1Q09, although it was partially offset by lower interest expense. We expect prime grade A office rentals to fall to $5psf. We downgrade the stock to Sell (3M) from Buy (1L) given the increased likelihood that CCT will do a rights issue.

Risk of capital raising – CCT maintains their stance that they will explore all options and that whether they would consider a rights issue will depend on market conditions. Given the fast-falling office rental and the likelihood of rising gearing ratio with falling asset values, we think there is a significant risk that CCT may do a cash call.

1Q09 results ahead due to lower interest cost – For 1Q09, CCT reported a DPU of 3.24 cents, equivalent to approximately 28% of consensus and our estimates of 11.1 cents and 11.5 cents respectively. Net distributable income came in better than expected due lower-than-expected interest expense.

Revenue flat, NPI up on cost savings – Operationally, rental revenue was flat from 4Q08 but it was boosted by the full quarter contribution from Wilkie Edge. Excluding Wilkie Edge, rental revenue was down S$1m (or 1%), led by a 8% decline in rental revenue at Raffles City. However, its NPI was up 6% with significant cost savings in particular at Raffles City. 6 Battery Road and Raffles City saw a 1 percentage point drop in occupancy although Robinson Point improved 5 percent points to 95.9%.

1Q09 results -- Reported profit of S$27.7m was affected by S$12.6m CDO losses but S$40m recurring profit (-41% qoq, -48% yoy) was in line with our estimates. Revenue reached S$726m (-20% qoq, -23% yoy) boosted largely by Printing (+6% yoy) while others (Networking, Test Measurement, PC) were largely down ~30% yoy.

Margin trend -- Gross margins reached 17.7% (vs our 18.2%; down -347 bps yoy) due to a lower revenue run rate and a shift towards turnkey activities for a Printing customer. Venture also recorded FX gains of S$9m (vs. S$4m in 1Q08).

Key highlights -- 1) FCF generation continued to improve (S$97m vs negative S$2.6m in 1Q08); net cash reached S$304m vs S$192m in 4Q08; 2) Valuations are below historical trough (P/E and P/B) with potential M&A angle as a buyout candidate; 3) Impact from CDO/investments exposure already priced in while any potential write-back would be a positive surprise.

Maintain estimates but raise div payout -- We maintain our above consensus estimates but raise i) our dividend forecast by ~10% to S$0.50; and ii) target price to S$6.70 on higher target price multiple of 8.5x 09E P/E. At the current level, Venture trades at 09E 7.8x P/E, 0.8x P/B and offers 8.4% net div yield.

Risk rating – We lower our risk rating to Medium, from the High Risk rating derived from our Quant rating system, in view of Venture's consistent strong FCF generation ability and improved net cash of about ~S$300mn.

Post Chartered’s recent rights issue and the shares’ 100% rise over the last month, the stock is trading at 0.6X 09E P/B (fully diluted). We downgrade Chartered to Sell from Neutral, as we view the shares as overvalued. We estimate that 1) its ROE can reach only 5% and -0.3% at 100% utilization and its avg utilization of 75% over the last 5 years, respectively, with a stretched depreciation schedule of 7 years (vs. 5 years at TSMC and UMC); 2) Chartered is gaining market share at 65nm/40nm, but the return of its 65nm/45nm business was negative in 1Q09; 3) Chartered has not had positive annual free cash flow since inception and will likely require further financing in 2009-10.

1) Chartered completed a rights issue that should add about 2bn floating shares, or 21% of total shares outstanding in April 2009, by our estimates. These rights have very low costs (S$0.07/US$0.46 for local/ADR share) and have no lock-up period; as such, we expect some investors to take profit from the rights issue soon. 2) According to management, Chartered needs additional financing of US$300mn-$400mn in 2010 in order to satisfy debt repayments, loan covenant, and capex needs. Thus, we expect increased uncertainty over Chartered’s capex and R&D expenditures.

We have recently raised our 2009 foundry shipment forecast to -28% yoy from -45% yoy in light of stabilization in end demand. Accordingly, we raise our rev/EPS estimates for Chartered by 11%–22% and 76%–83% in 2009E-2011E, respectively. We raise our 12m local/ADR TP to S$0.13/US$0.80 based on 0.5X 2009E P/B to reflect our higher semi forecasts.

TP S$12.20 — Excluding one-time gains, GEH made an estimated 1Q09 net profit of S$42m* (4Q08: S$77m), vs. our full year 2009 forecast of S$330m. As expected, new business premiums continued to be weak as in 4Q08, impacting core insurance profit, and resulting in a lower new business embedded value. The result will nominally boost the non-interest income line and reported net profit for OCBC's 1Q09 result (reporting 6 May), but the weak new business premiums suggest a poor outcome for wealth mgmt and bancassurance fees.

1Q09 profit S$237m, (4Q08: S$77m, 3Q08: S$135m) — Premiums fell 11% qoq to S$1,176m. Life profits were S$266m (4Q08: S$115m), comprising par fund profit S$29m, non-par profit S$195m, ILP profit S$42m. General insurance profit was S$12m in 1Q09. Results boosted by one-time profits of S$213m, meaning recurring insurance profits were S$64.5m.

S$213m non-recurring gains — Adopting risk-based capital in Malaysia gave a S$180m gain on revaluing assets and liabilities from a cost to a market basis. In Singapore an exercise to reduce duration mismatch on longer dated portfolio assets/liabilities in the non-par fund also generated non-recurring gains.

Outlook — The April recovery of equity markets should help lift performance for the rest of 2009, but we suspect lower new business premiums (especially on single premiums) could remain the trend for some time given the events of 4Q08. Mgmt previously indicated that there would be greater reliance on higher margin but lower volume regular premium sales in the near-term.

We are more confident on the quality of book values as we see less risk from securities portfolios today and we believe that banks have sufficient earnings to absorb credit losses. As such, we think valuations are already very undemanding at 1x Dec 09E BV. In our view, as long as the risk of book value erosion reduces incrementally, we think the sector is unlikely to retest the 0.5x PBV lows during the 1998/9 Asian Crisis. With the economy expected to trough in 2009, we expect the sector to re-rate back closer to its 1.4x PBV mean.

We upgrade UOB and OCBC to Buy (previously Neutral and Underperform). We also upgrade DBS to Neutral (previously Underperform). Our revised price objectives are S$13.95 for UOB (1.5x Dec 09E BV); S$6.50 for OCBC (1.4x Dec 09E BV); and S$9.45 for DBS (0.9x Dec 09E BV). UOB is our top pick. Tactically, we think it has the greatest potential for a rebound following its YTD underperformance (down 15% vs FSSTI which rose 5%). Fundamentally, the stock was sold down on concerns on the quality of its BV and the risk of a cash call. As these concerns are resolved, we foresee a re-rating at hand.

We have lowered our 2009E-2010E forecasts for OCBC by 14%-23% and DBS by 49% to reflect higher credit costs. Our numbers for UOB are cut by only 3%-4% as we have adjusted our forecasts earlier. Although we think there will be more consensus downgrades, we believe the market has already priced this in. The important point, in our view, is that banks will still be making money and not suffer from book value erosion.

NPLs have only just started to rise in 4Q08 and are likely to continue on an uptrend as the recession feeds through into the banking system. By our estimates, NPL rates would have to quadruple within 12 months from existing 1.5%-2% levels before banks start to bleed (assuming min. 60% loan loss coverage). We believe the chances of this materializing are slim given signs of the trade cycle stabilizing and expectations of the economy to trough in 2009.

We are starting to see signs of a bottom forming in the economy. Current leading indicators are pointing towards a sequential improvement in the economy. Seasonally adjusted NoDX figures rose 8.5% in March driven mainly by exports to China. Our economist, Silvia Liu, expects the economy to trough in 20009E after contracting by 6.5% before GDP rebounds to grow at a modest 3.2% in 2010E.