Straits Times Index

Retail Market Monitor

Singapore 20 June 2013

Market News

The FSSTI lost 15.76pt to close at 3,213.79 amid caution ahead of the Federal Reserve’s monetary-policy decision later in the day. Keppel Land fell 0.6% to S$3.55 after announcing its China unit secured a prime landed residential site in Shanghai for S$266m. The broader market saw 260 gainers and 164 losers, with total trading value at S$1.25m.

U.S. stocks fell sharply and Treasury yields surged on Wednesday after Federal Reserve Chairman Ben Bernanke said the central bank may scale back its bond purchases this year, depending on the economic outlook. The DJIA lost 1.4% to 15,112.19 while the S&P 500 index retreated 22.88pt, or 1.4%, to 1,626.73. The Federal Open Market Committee currently anticipates moderating the monthly pace of purchases later this year. For every stock that rose, nearly six fell on the NYSE, where 760m shares were traded.

What’s in the Pack

Hengyang Petrochemicals Logistics - MEGCIF5 invests Rmb271.25m for a 35% stake in Hengyang Holding Pte Ltd

(HYNG SP/NOT RATED/S$0.33)

We view the transaction as positive as it may reflect the true market value of Hengyang’s net assets at S$100m vs a market capitalisation of $67.1m

Singapore Airlines - Weak 2MFY14 Traffic And Rising Capital Commitments Raises Risk Profile. Downgrade to HOLD.

(SIA SP/HOLD/S$10.20/Target: S$11.50)

We cut our FY14 earnings estimates by 34% factoring in lower pax yields and adjusting our passenger and cargo traffic assumptions.…

Straits Times Index (FSSTI Index) –

5.4% potential downside

Downward bias with a target level of 3,060-3,080 (a 50%R zone). The Straits Times Index appears to form an interim tweezer top and is trading below its 150-day moving average…

Genting Singapore (GENS SP, G13) –

Technical SELL with +7.5% potential return

The stock has failed to move above its mid Bollinger band and its 50- and 200-day moving averages look poised to form a dead cross…

City Developments (CIT SP, C09) -

Take profit from previous technical BUY

The stock has since returned 6.9% on closing prices. Some profits could be taken off the table as the stock has currently…

Price Chart

Source: Bloomberg

Key Indices

Price

Chg (%)

YTD

(%)

DJIA

15,112.19

(1.3)

15.3

S&P 500

1,628.93

(1.4)

14.2

FTSE 100

6,348.82

(0.4)

7.6

FSSTI

3,213.79

(0.5)

1.5

HSI

20,986.89

(1.1)

(7.4)

CSI 300

2,400.77

(0.7)

(4.8)

Nikkei 225

13,245.22

1.8

27.4

KLCI

1,772.88

(0.1)

5.0

Top Volume

Stock

Price (S$)

Chg (%)

Volume (‘000)

Singapore Telecom Ltd

3.690

(2.1)

29,666

Golden Agri-Resources Ltd

0.570

(0.9)

27,926

Noble Group Ltd

1.025

0.0

20,902

Thai Beverage Pcl

0.615

0.8

19,709

Global Logistic Properties Ltd

2.690

(1.1)

19,102

Top Gainers

Stock

Price (S$)

Chg (%)

Vol (‘000)

Silverlake Axis Ltd

0.770

5.5

3,079

Raffles Medical Group Ltd

3.040

3.4

195

Osim International Ltd

2.020

3.1

1,031

ARA Asset Management

1.850

2.8

1,331

Haw Par Corp Ltd

7.320

2.4

Top Losers

Stock

Price (S$)

Chg (%)

Vol (‘000)

Del Monte Pacific Ltd

0.800

(3.6)

Petra Foods Ltd

3.650

(2.7)

211

Hongkong Land Holdings Ltd

6.840

(2.6)

1,604

Singapore Telecom Ltd

3.690

(2.1)

29,666

Singapore Airlines Ltd

10.200

(1.9)

1,595

Money Talk Singapore 20 June 2013

Hengyang Petrochemicals Logistics (HYNG SP)							NOT RATED
*MEGCIF5 invests Rmb271.25m for a 35% stake in Hengyang Holding Pte Ltd* Valuation · Discount to peers’. Hengyang is trading at a forward 12-month PE of 17.4x, or a 19% discount to its tank terminal peers’ average of 21.5x. Investment Highlights · Hengyang Petrochemical Logistics (Hengyang) transports and stores liquid petrochemical products such as phenol, fuel oil, acetic acid and ethylene for blue-chip customers, including BP, BASF, CNOOC, Shell and Sinopec. The group operates in the Yangtze River Delta and has operational facilities in Deqiao, Jiangyin. · New facilities to boost storage capacity. The group is currently developing new facilities in Wuhan, Chongqing and Yueyang at the middle and upper reaches of Yangtze River. These facilities are located within chemical and industrial parks near the operations of its existing customers. With these facilities developing in phases, Hengyang will boost its current storage facility from 265,000 cubic metres to 962,600 cubic metres in 2014 and up to 1.39m cubic metres by 2016. · Strategic investor MEGCIF5 took up a 35% stake in Hengyang Holding Pte Ltd (HHPL). Macquarie Everbright Greater China Infrastructure Fund Investments 5 Ltd (MEGCIF5) has agreed to invest Rmb271.25m for a 35% stake in HHPL, with Hengyang owning the rest. HHPL is the holding company for all storage facilities assets in the company. This transaction values Hengyang’s stake in HHPL at Rmb504m, or about S$100m. · MEGCIF5 is a global infrastructure fund managed by Macquarie and Everbright. According to the official website, the fund has a total committed capital of US$870m and specialises in infrastructure project investments, such as toll roads, airports, water treatment facilities, ports, and renewable energy projects in Hong Kong and China. · We view the transaction as positive as it may reflect the true market value of Hengyang’s net assets at S$100m vs a market capitalisation of S$67.1m. With the cash in hand, the group may be able to speed up the construction and commissioning of the storage facilities in order to drive revenue and boost net profit going forward.
							Share Price	S$0.33
							Target Price	n.a.
							Upside	n.a.
							Company Description
							Hengyang Petrochemical Logistics is a petrochemical logistics services provider. The company mainly stores and transports liquid petrochemical products. It also provides land transportation services.
							GICS sector	Energy
							Bloomberg ticker:	HYNG SP
							Shares issued (m):	203.5
							Market cap (S$m):	67.1
							Market cap (US$m):	53.3
							3-mth avg t'over (US$m):	0.0

							Price Chart Source: Bloomberg Analyst Brandon Ng, CFA +65 6590 6615 brandonng@uobkayhian.com
Key Financials
Year to 31 Dec (Rmbm)	2010	2011	2012	1Q12		1Q13
Net Turnover	70.0	89.0	110.4	31.6		25.9
EBITDA	30.8	36.4	47.6	14.0		10.5
EBIT	25.1	26.6	25.2	8.3		5.1
Net profit	16.8	16.2	5.4	3.1		1.4
EPS (fen)	11.75	10.55	2.76	1.75		0.71
PE (x)	13.7	15.2	58.2	-		-
P/B (x)	0.8	0.8	0.8	0.8		0.8
Dividend Yield (%)	0.0	0.0	0.0	-		-
PATMI Margin (%)	23.9	18.2	4.9	9.7		5.4
Net Debt to Equity (%)	29.9	16.9	31.9	8.5		64.2
Interest cover (x)	2.4	1.3	2.2	-		-
ROE (%)	6.3	5.3	1.5	-		-
Source: Bloomberg, UOB Kay Hian
Retail Market Monitor Singapore 20 June 2013

*Traders’ Corner*
					Straits Times Index (FSSTI Index) – 5.4% potential downside Last level: 3,213 Resistance: 3,235 Support: 3,060 Downward bias with a target level of 3,060-3,080 (a 50%R zone). The FSSTI has hit our rebound target of 3,230 and appears to form an interim tweezer top and is trading below its 150-day moving average. A break below its 200-day moving average may suggest more selling pressure, perhaps towards its immediate rising trendline. Its 14-day RSI indicator appears to turn down below a reading of 45 and its weekly MACD indicator is showing no signs of reversal. Watch to see whether its daily MACD indicator could hook down instead. The next support level could be near 2,950.
					Genting Singapore (GENS SP, G13) – Technical SELL with +7.5% potential return Last price: S$1.395 Resistance: S$1.45 Support: S$1.29 SELL with a target price of S$1.29 with tight stops placed above S$1.435. The stock has failed to move above its mid Bollinger band and its 50- and 200-day moving averages look poised to form a dead cross. Its Stochastics indicator looks poised to form a bearish crossover. Watch to see whether its MACD indicator could hook down instead. Our institutional research has a fundamental SELL with a target price of S$1.17.
					City Developments (CIT SP, C09) - Take profit from previous technical BUY Last price: S$10.50 Resistance: S$10.68 Support: S$9.68 The stock was featured as a technical buy on 14 Jun 13 when it opened at S$9.82 and did not stop out below S$9.65. The stock has since returned 6.9% on closing prices. Some profits could be taken off the table as the stock has currently exceeded our buy target price of S$10.30. Watch to see if the stock could be well supported near its 200-day moving average. Our institutional research has a fundamental HOLD with a target price of S$12.19.
Source: Nextview					Jeffrey Tan +65 6590 6629 jeffreytan@uobkayhian.com

Retail Market Monitor

Singapore 20 June 2013

Corporate News

SingTel: In tie-up with online storefront firm. SingTel is throwing its weight behind online shopping through its partnership with Canadian online retail storefront firm, Shopify. Yesterday, the telco announced the launch of Shopify here and in India, with Malaysia and Indonesia to follow by next month. (Source: The Business Times)

Tat Hong: Sets up S$500m MTN programme. Tat Hong Holdings has established a S$500m multi-currency medium term note (MTN) programme. Net proceeds will be used for general corporate purposes, including the refinancing of borrowings, capital expenditure and general working capital. Tat Hong was in the news recently for entering into heads of agreement with Intraco and Myanmar businessman Aung Moe Kyaw to set up a JV in Singapore to carry out the business of renting cranes and distributing cranes and excavators in Myanmar. (Source: The Business Times)

Genting Singapore: Fitch affirms Genting's debt ratings. Fitch Ratings has affirmed casino operator Genting Singapore's long-term foreign and local currency debt rating at A- and its Singapore-dollar denominated perpetual capital securities at BBB. Fitch said Malaysia-based Genting's ratings reflect its continued strong gaming market segments in Malaysia and Singapore, its robust but lower operating margins, and low net financial leverage. The ratings also benefit from its modest diversification via its plantation and power businesses. (Source: The Business Times)

MLT: Buys Korean warehouse. Mapletree Logistics Trust (MLT) has acquired its eighth piece of property in South Korea for 28.75b Korean won (S$32m). The property, a warehouse facility called The Box Centre, is being purchased from Oakline Co Ltd, a supply chain management company in South Korea that stores and distributes spirits and wine. Oakline will lease back the property for six years with built-in rental escalation from the second year onwards. Based on the purchase price, the property will provide an initial net property income yield of 8.4% and is expected to be distribution per unit-accretive. (Source: The Business Times)

Singapore Airlines: Orders 30 more Airbus A350s. Singapore Airlines has placed a firm order for 30 Airbus A350-900 aircraft worth US$8.6b at list prices, with options for 20 more of the jetliners. The airline could convert the options into larger A350-1000s under the terms of the deal. The carrier now has 70 firm orders for the A350. (Source: The Business Times, Reuters)

Retail Market Monitor

Singapore 20 June 2013

From the Regional Morning Notes

Singapore Airlines - Weak 2MFY14 Traffic And Rising Capital Commitments Raises Risk Profile. Downgrade to HOLD.

(SIA SP/HOLD/S$10.20/Target: S$11.50)

FY13 PE(x): 30.4

FY14F PE(x): 37.0

Weaker-than-expected 2MFY14 traffic numbers, warning on yields and concern over SIA’s aircraft orders lead us to downgrade SIA to HOLD. Yields are under pressure and if loads don’t improve in June, losses are likely. Along with the May operating stats, SIA mentioned that yields are expected to remain under pressure as efforts are made to boost loads in the current operating environment. June is a peak period in 1QFY and if loads are below 80.5%, the odds of the parent airline business swinging into a loss are heightened.

Silk Air fares no better with a ytd 7.4% decline in load factor. In 1QFY13, Silk Air contributed 25% of group operating profit. Given, the steep decline in loads, no doubt due to competition from low-cost carriers (LCC), Silk Air’s yields and profits are also likely to remain weak in 1QFY14.

Market spooked by huge aircraft orders. As at end-FY12, SIA had capital commitments of S$7.5b. Recent orders along with associated engine orders could place this commitment at an estimated S$55b over the next 10-12 years. Total commitment now stands at 5x book value 4.6x market cap. While SIA has several options such as sale and leaseback of existing aircraft, we reckon it will fund about 20-25% of its capex requirements. SIA has generated an average of S$2.2b in operating cash flow over the past years and thus internal cash flow could fund about 50% of capex requirements on a straight line basis. We estimate that SIA would thus require external funding in the range of S$5b-8b to fulfill its capex commitments.

Competition from Middle Eastern hubs. According to Amadeus, Air Traffic Trend Intelligence Solution, 15% of all pax traffic between Asia Pacific and Europe transit at Dubai, Doha and Abu Dhabi. Traffic on the transit routes are growing at a faster pace than the main route, which highlights the significant competition that SIA faces.

Downgrade from BUY to HOLD, with a lower target price of S$11.50 (S$13.30 prev). We now value SIA at 0.75x forward book value (0.9x previously) on the back of higher capex commitments and weaker-than expected pax traffic growth. We cut our FY14 earnings estimates by 34% factoring in lower pax yields and adjusting our passenger and cargo traffic assumptions.

Retail Market Monitor

Singapore 20 June 2013

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