Senai-Pasir Gudang-Desaru expressway toll starts tomorrow

PETALING JAYA: Collection of toll will begin for the 77km Senai-Pasir Gudang-Desaru Expressway tomorrow and the main feature of the road is the single-plane cable stay-bridge which at 500 m is one of the longest in the world.

The longest is the Tsurumi Tsubasa bridge in Yokohama in Japan with a mid-span of 510 m.

Senai-Desaru Expressway Bhd chief executive officer Mustaza Salim said it took a lot of careful designing and planning to construct the bridge which has become iconic in the southern part of Peninsular Malaysia.

“It is quite difficult to build the single plane bridge compared with a double-plane bridge as the single plane requires specialised technology but we wanted to do something different. That is why we settled for a single plane cable stay bridge,” he said.

A single plane bridge is suspended by cables in the centre of the bridge whilst a double has two rows of cables by the sides like the Penang Bridge.

The company won the 33-year concession from the Government to build, operate and transfer the expressway which includes the single plane bridge in 2005.

It took nearly six years to complete the project and the expressway was open to commuters on June 10.

The cost of the expressway was RM1.4bil which was funded via debt and equity and a loan facility from the Islamic Development Bank infrastructure fund.

The toll rate ranges from RM3.70 to RM22.30 depending on the distance travelled and for now the company will only be able to earn enough for its operations and to service its debt obligations. Dividends can only be expected after eight years.

The expressway connects Senai, Ulu Tiram, Cahaya Baru, Pasir Gudang and Penawar and it is the third longest toll highway in the country.

It also provides easy access to Desaru, a tourist spot which had seen a decline in tourists due to issues of accessibility over the years.

With this new expressway the state hopes the number of tourist visiting Desaru will increase.

Murtaza said there were about 30,000 vehicles using the expressway on weekends.

“During the construction of the bridge, Ranhill had to overcome numerous challenges including unpredictable weather conditions. Construction works were interrupted due to strong winds and heavy rain which made it dangerous for welding.

“Cost wise it is more economical to build a single plane bridge compared with double-plane but in terms of design the single plane is much more difficult,” he said.

The company collaborated with a Danish company for the technology and a Canadian firm for bridge trackers.

The bridge was planned and constructed with environmental considerations in mind.

It crosses Sungai Johor via Pulau Juling and Tanjong Penyabong with a length of 1.7km and the area is surrounded with mangrove forest reserves, fish farms and kelongs. Construction activities for the bridge were minimised within the river to protect the marine life in the river. In the design of the bridge, navigational considerations were taken into account. The central span is 500 m wide with an air draft of 24 m.

http://biz.thestar.com.my/news/story.asp?file=/2011/7/9/business/9066170&sec=business

ASL Marine Holdings - Order book boost (DBSVickers)

HOLD S$0.635 STI : 3,125.87

Price Target : 12-Month S$ 0.63 (Prev S$ 0.69)

Reason for Report : Revision in earnings forecasts, TP

Potential Catalyst: Sustained order wins

• Order wins of S$131m boost orderbook; book-to-bill ratio raised to 1.38x from 0.96x.

• Don’t get overly excited – margins could be low.

• Lowered FY11/12F earnings by 17%/2% for weak margins.

• Maintain HOLD, TP S$0.63.

Newbuilding orders worth S$131m. ASL announced new orders for 11 vessels worth c. S$131m. These comprise 9 AHTS and 2 Emergency Response and Rescue vessels.

Much needed boost to shipbuilding orderbook. This batch of orders brings ASL’s total FY11 shipbuilding order wins to c. S$186m, ahead of our S$80m order wins assumption, and provides a much needed boost to its steadily declining orderbook. We estimate end 4Q11 backlog of S$291m vs. S$218m as of end 3Q11, or a book-to-bill ratio of 1.38x.

But don’t get overly excited. While we view this positively, we are not overly excited as 1) these orders were likely to have been secured at relatively low margins, given the intense competition for such vessels (i.e. small AHTS) in the market; 2) earnings contribution from these orders is expected to kick in only from 3Q FY12 onwards, and merely offset the earnings drop from the completion of the existing backlog.

FY11/12F reduced 17%/2%. This takes into account for 1) weak chartering revenue YTD; and 2) reduced gross margins over FY11/12 to reflect intense competition across the repair and chartering businesses. The impact to FY12F is somewhat mitigated by our 51% increase in FY12’s shipbuilding revenue forecast from the latest batch of orders and our higher FY12 order wins assumption of S$150m (prev S$100m).

Maintain HOLD, TP reduced to S$0.63. Our TP is lowered to S$0.63 (prev S$0.69 on weaker earnings pegged to FY12 recurring PE of 8.2x (prev 7x), in line with the small/mid cap Singapore listed yards. We will turn more positive on ASL when 1) order flow momentum can be sustained; 2) pricing power gradually returns; 3) margins show signs of recovery. Maintain HOLD.

Foreland Fabrictech – Suitable For All Weather (POEMS)

BUY (Initiation)

Closing Price S$0.135

Target Price S$0.191(+41.5%)

From the time ADAM took a bite of the forbidden fruit, the textile industry was born. From the main purpose of covering up one’s modesty, textile production has evolved to satisfy Man’s vanity. Beside aesthetic appeal, the textile industry has also evolved in its own right to offer a greater variety of selection that caters to different usages, not just on clothing. Today we have functional fabrics that boast of properties such as water resistant, UV protection, air breathability and many more. I’m sure DAVID would have preferred a pair of tight fitting hotpants made of breathable material to a fig leaf.

Contrary to popular belief, the PRC textile industry is a growing but competitive industry. Sales revenue from 2003 to 2010 registered a CAGR of 19.0% while net profit had a CAGR of 27.4%. Number of enterprises also grown from 25,803 to 55,391 in end 2010, highlighting the attractiveness and ease of entry. Annual loss making enterprises ratio approximates 15% going downtrend. Key catalyst to the industry is growing domestic consumption. As such, we think it is not difficult to survive, as in; stay out of the red. But it takes a bit of innovation and distinction to achieve outperformance.

Foreland is a vertically integrated manufacturer of normal and functional fabric. The core strength of the company lies in its expertise in producing functional fabrics. It currently offers a range of 19 functional fabrics to customers and the company aims to introduce at least 2 new products annually. We believe offering high quality functional fabric is the distinction to achieve outperformance. Normal fabric competes on price, functional fabric competes on quality. We estimate functional fabric can achieve 10ppt higher in gross profit margin.

Reasons why we are featuring the stock:

- An inflexion point was observed in 1Q10, profitability since then has rebounded strongly. Future earnings are premised on strong demand for functional fabrics.

- Current entry point looks attractive relative to 2 previous batches of placees. 1st batch paid $0.1235, 2nd batch paid $0.16.

- A top 10 customer took a 3.9% stake in the company at $0.16, signifying confidence in a long term business relationship

We price Foreland at 4.35x FY11E earnings. This represents a hefty 70% discount to broad market PE of around 14.5x. Reasonable considering a 50% (we are cautious too) S-chip “may-go-bust-anytime” sentiment discount, 10% small cap discount and a further 10% for the laughable bid-ask spread of $0.001. This gives us a target price of $0.191.

Residential Property Market - Developers building in price dips (OCBC)

Maintain Neutral

Previous Rating: Neutral

Developers building in price dips. Developers' enthusiasm for residential sites in the government land sales (GLS) program appears to be waning. Recent GLS tenders imply breakeven prices that are some way below market prices, suggesting that developers are expecting significant price dips ahead. We analyzed residential GLS sales over the last 12 months and found that developers began to build in heavier discounts into their tenders after May 11. This is likely due to recent developments after the general elections: rising home prices being a major election issue, the appointment of Minister Khaw, and latest initiatives to stabilize property prices.

Breakeven ASP >20% below market levels. Our analysis shows that, over the last year, the average winning tender for a 99-year GLS condominium site would translate into a breakeven ASP that is around 7% below market levels at tender close. We think this is reasonable - given an annual property price appreciation of 5%, a breakeven ASP at 7% below market would yield an expected 12-17% profit when a developer launches sales in a year or two. Interestingly, we found that the discount between breakeven and market ASPs had began to spike after May this year. For the Buangkok Dr tender (2 Jun 11), the breakeven ASP (S$780 psf) was estimated to be 14% below transactions at the Quartz. We saw discounts continue to widen for the Flora Dr and West Coast Link sites. By 30 Jun, the discount was around 26% for the Choa Chu Kang GLS site.

Expectations could be partly self-fulfilling. In our view, developer expectations could be partly self-fulfilling. Primary sale prices typically exhibit downward stickiness because optimistic developers acquiring land at demanding valuations would hold their prices during periods of low demand, given sufficiently strong balance sheets. Hence, market observers sometimes cite a "buy high, sell high" dynamic, which can occur over the short to mid-term. However, developers expecting a weaker market ahead would guard against excessive acquisition costs and hence have increased flexibility to lower prices, facilitating demand-led downward price adjustment

UOL to gain in this environment. We believe that UOL is in a prime position to benefit from uncertain prices and softening acquisition environment. First, it has limited residential exposure with most of its landbank sold. Moreover, given management's track record of accretive acquisitions, we think UOL will find increased opportunities to replenish its landbank in a softening acquisition environment. Maintain BUY at a fair value of $5.57 (at 20% discount to RNAV).

Venture Corporation - Growth easing (DBSVickers)

HOLD S$8.57 STI : 3,125.87 (Downgrade from BUY)

Price Target : 12-month S$ 7.70 (Prev S$ 11.00)

Reason for Report : Post conference update

Potential Catalyst: Stronger than expected demand

• Q2 stays sluggish; T&M and Industrial pick up was less robust than projected

• Cut FY11F/12F by 10% to reflect weak momentum

• Downgrade to HOLD, TP reduced to S$7.70.

Muted near term growth. Venture participated in our POA conference on Tuesday with brisk investors’ attendance. While presenting long-term strategy and positioning of the company, management highlighted near term softness in the market place, partly weighed down by macro uncertainty. Our channel checks indicated that selected component shortages has pressured deliveries of some products while Hypercom’s volume could be disrupted by the potential acquisition by Verifone, which is now halted by order of the US court on anti-trust grounds. We believe near term growth is muted although Venture’s strategic direction remains intact.

Uninspiring 1H; cut FY11F/FY12F. Contrary to previous expectation for a sequentially stronger Q2, we now believe sales and earnings for the quarter could be flat-lined. This is consistent with Agilent’s and HP’s guidance for flattish sales in the June quarter. Coupled with modest growth in Q1, first half-year could turn out less optimistic than we had expected. We have thus cut FY11F/FY12F by 10% to reflect lower sales while keeping net margin between Venture’s historical trend of 6-8%.

Strong CFs will support dividend payout. Although bottomline growth is lacking, we are confident Venture can comfortably sustain dividend payment of S$150.8m (DPS: S$0.55) with a projected free cashflow of S$270m in FY11 even if capex rose 53% y-o-y to S$40m. This implies an attractive dividend yield of 6.4%.

TP revised down to S$7.70, downgrade to HOLD. On top of earnings cut, we have also lowered valuation peg from 15x (mean) to 11.5x (-1SD) in view of the muted growth prospect. Our TP is thus revised to S$7.70 accordingly. Notwithstanding potential share price weakness, we believe downside risk would be limited by the attractive 6.4% yield. Recommend HOLD.

Ascendas REIT (DBSVickers)

HOLD; S$2.14, Price Target: S$2.14

Ascendas REIT acquires Nordic European Centre at International Business Park for S$121.5m

In the News

Ascendas REIT announced the acquisition of Nordic European Centre - a 7 Storey business park building located in International Business Park within the Jurong Lake District masterplan. The property has a total GFA of 28,378 sqm (NLA of 22,066 sqm) and located in close proximity to Ayer Rajah Expressway. This is the 6th property within the International Business Park that AREIT owns, which empowers the landlord with significant presence to extract possible operational efficiencies. In addition, the acquisition will bring in quality MNCs tenants like Merck Pte Ltd, Evonik Degussa (SEA) Pte Ltd and Thyseenkrupp Mannex Asia Pte Ltd. The building was previously owned by a fund managed by Alpha Investment Partners Limited since July 2006.

The purchase consideration is S$121.5m representing a price/GFA of S$398 psf.

Our thoughts:

(1) Initial yield is estimated to be c6.0%; accretive to earnings. This compares favorably against the current NPI yield of c.5.9% on its portfolio of Business Parks assets, based on latest valuation and reported numbers by the REIT. Current occupancy level of 83% also offers opportunity for further earnings upside going forward. We note that this acquisition will be funded through proceeds of recent placement/debt and will be accretive to DPU. However, the acquisition is relatively small in comparison to its portfolio, and DPU is estimated to increase by only c 0.02 Scts or <1%.

(2) debunks "excess capital theory" in the street; acquisition within our estimates. With this acquisition, Ascendas REIT deploys a major part of its "excess capital" that was raised in previous placement exercise. We understand that the manager will continue to hunt for assets in Singapore and could possibly tie up a couple of other opportunities over the coming quarters. We have assumed S$200m worth of acquisitions in our numbers for FY12.

We maintain our TP and Call.

YTLP - Disposal of 15% in PT Jawa (HLIB)

Price Target: RM2.70

Share price: RM2.16

News:

 YTLP is disposing 42.86% equity stake in YTL Jawa BV, which in turn own 35% of Jawa 1,220MW coal-fired power plant, to Marubeni for US$224.0m (RM681.0m).

 The net proceeds is expected to be utilized for future investments in utility assets, working capital requirements and/or paring down of existing borrowings.

 YTLP is estimated to realize one-off gains of RM210.1m or 3.23 sen from the stake disposal.

 The deal is expected to be completed in the 1st half of FYE6/12.

Financial impact:

 Assuming deal completion on 31st December 2011, FYE6/12 core earnings will reduce by RM48m (3.5%) and recognize capital gain of RM210.1m, while FYE6/13 core earnings will reduce by RM96m (6.6%).

Pros / Cons:

 The exercise will reduce YTLP effective stake in PT Jawa Power to 20% from 35%.

 We believe the transaction will provide future opportunities for YTLP to form strategic partnerships with Marubeni (US$12.2bn market capital), who is a global trading company with diversified business portfolio including power projects and infrastructures.

 With the cash raised, net gearing (where most loans reside at operating company level) will improve marginally from 1.75x to 1.70x by end FYE6/12. Thus we believe YTLP is building up its war-chest and actively seek for oversea investment opportunities.

Risks Downside risks ¨

 Appreciation of RM against other foreign currencies.

 YTLC facing strong competition from the existing telcos.

Forecasts:

 Unchanged pending deal completion.

Rating:

BUY

 Positives ¨

 Strong and stable cash flow.

 Large cash piles (RM7.2bn) allowing YTLP to look for more value accretive acquisitions

 Relatively unaffected by the surging energy prices.

 Negatives:

 The increasing competitive landmarks for YTLC especially with the implementation of LTE networks by 2012.

Valuation:

 Maintain target price at RM2.70 based on Sum-of-Parts.

Global Investments Limited (KimEng)

Up-to-date in 60 seconds

Background: Global Investments Limited (GIL) is a mutual fund company which invests primarily in operating lease assets and loan portfolio and securitization assets. It was heavily affected by the global financial crisis due to several loans that it has invested in being reduced to junk ratings. This led to the appointment of ST Asset Management as the replacement manager of the company.

Recent development: GIL has completed a non-underwritten 2-for-5 rights issue of 157m new shares at S$0.138 per share, which was 152% oversubscribed. Net proceeds of $21.47m would be used for further investments. Operationally, the company has recorded a third consecutive profit-making quarter of $7.2m since FY09.

Key ratios…

Price-to-earnings: 13.0x

NAV per share: $0.27

Dividend per share / yield: $0.0075 / 4.8%

Net cash/(debt) per share: $0.04

Net cash as % of market cap: 23.3%

Share price S$0.156

Issued shares (m) 550.2

Market cap (S$m) 86.4

Free float (%) 91.6%

Recent fundraising activities Mar 11 – 2-for-5 rights issue of 157m shares at S$0.138/share

Financial YE 31 Dec

Major shareholders Boon Swan Foo – 8.4%

YTD change -17.9%

52-wk price range S$0.14-0.20

Our view:

Portfolio breakdown. GIL’s portfolio of assets and economic exposures include an investment in a listed entity operating in the aviation industry, an investment in two commercial aircraft subject to lease, freight rolling stock operating in North America, and passenger train fleets, locomotives and freight wagons operating in Europe, all subject to lease. It also has a diversified portfolio of loans, equity notes and net interest margin notes in securitisations secured against residential and commercial properties in Australia and the United Kingdom, as well as investments in European collateralised loan obligation vehicles and a loan secured by inventory and receivables.

Prudent investment approach. GIL is prudent on booking in investments to ensure stability in the balance sheet. In fact, some of the investments’ carrying value has already been written down to zero, which could only have a positive impact should the company decide to sell the assets or loans. Its latest investments involve floating rate notes, which are immune to interest rate risk and provide a steady income.

Valuations improvement. If the rights issue were excluded, the NAV in 1Q11 would have risen to 33 cents (+6.4% YoY). GIL is committed to distributing the bulk of its economic income as dividends. It has provided dividend guidance for 1H11 of 0.75 cents a share, translating to a 4.8% yield. The stock currently trades at a huge discount with P/B at 0.6x.

Wing Tai Holdings (KimEng)

Event:

Wing Tai announced the sale of a unit at Le Nouvel Ardmore to an interested person at $16.7m without discount. We estimate that this translates to a price of around $4,200 psf, 20% higher than our original assumption of $3,500 psf for the project. The launch of the leasehold Foresque Residences in May has been met with robust demand and Wing Tai has sold around 180 units to-date. Maintain BUY.

Our View:

The unit at Le Nouvel Ardmore has been sold to a company owned by Mr Cheng Wai Kin, the brother of Wing Tai Chairman Cheng Wai Keung. Without disclosure of the actual unit size, we estimate that the price works out to approximately $4,200 psf on an average unit size of 3,940 sq ft. We have raised our ASP assumption more aggressively to $4,000 psf for both Ardmore Park projects, consequently increasing our RNAV by 10 cents a share.

The launch of Foresque Residences in May was met with rather robust demand, in our view. To-date, around 180 units have been sold at an ASP of $1,100 psf, about 10% higher than our assumption of $1,000 psf. Despite uncertainties brought about by policy overhang, the demand for well-located, high-quality projects such as Foresque Residences is expected to persist.

Wing Tai continues to be selective in acquisitions and has been a notable absentee in recent Government Land Sales (GLS) tenders. Given that the results of recent tenders suggest that land prices are moderating, we expect to see more participation from the group for attractive sites in the upcoming tenders.

Action & Recommendation:

We have lowered our target price to $2.12 as we ascribe a higher 30% discount to the RNAV of $3.03 while policy headwinds remain for pure developers like Wing Tai. However, we believe that the mid- and high-end segments, which form the bulk of Wing Tai’s landbank, are more resilient to the policy measures. In our opinion, valuations remain very attractive. Maintain BUY.

STATS CHIPPAC (Lim&Tan)

• STATS will release its 2Q2011 results on 29 July 2011 and will be hosting a conference call with analysts and investors together with the results release to discuss the company’s results release as well as provide the business outlook for 3Q ending Sept’2011.

• This would be the second time (the first was last quarter during the release of 1Q2011’s results on 21 Apr’2011) that the company is hosting a results conference call as well as providing the investment community with an outlook after having ceased it in 3Q2007, the quarter after the close of Temasek’s failed privatization attempt on the company.

• While notable with management attempting to regain investor and analysts’ following, we note that the stock has declined from mid- Apr’2011 when the stock was around the 75 cents level to 65.5 cents currently.

• We had turned negative on the stock since Oct’10 on the back of the deteriorating industry fundamentals and outlook and believe that with its key customers and competitors recently reporting weaker than expected results and warning on tougher times ahead, the stock will likely continue to remain stuck in its well-entrenched downtrend channel established since Oct’10.

• We maintain SELL.

Portek International: Coveted port play (DMG)

(BUY, S$1.23, TP S$1.56)

ICTSI’s offer for Portek undervalues the stock. On 1st June 2011, International Container Terminal Services, Inc (ICTSI) launched an unsolicited voluntary conditional offer to acquire Portek at $1.20/share, representing a 69% premium to the last traded price. The offer valued Portek at a historical P/E of 14.8x, significantly above its 2-year trading range of 3.5-8.6x P/E. While ICTSI’s offer appears attractive on a historical basis, we believe it undervalues the stock by as much as 30%. Portek has significant synergies and strategic value to ICTSI, and a successful acquisition would help the latter to meaningfully expand its footprints in fast-growing ports in Latin America and Africa where Portek is well-entrenched. ICTSI’s offer is conditional on it securing at least 50% of the outstanding shares by the close of its offer.

Portek’s businesses have excellent momentum and significant earnings upside. We believe Portek is poised to deliver robust earnings growth over a multi-year timeframe, with rising throughput and tariffs driving margin expansion at its port division as costs are relatively fixed. Tariff rates tend to increase at 10-15% per annum at its ports. With its track record of retrofitting ports and improving port productivity, it is well-positioned to win new port concessions. Case in point is Rwanda dry port, which the group clinched earlier this year. Meanwhile, the engineering arm plays a complementary role to the port division and improves its chances of winning new concessions. We forecast net profit CAGR of 28% over FY11-12.

Prospects of bidding war. Subsequent to the ICTSI offer, Portek announced that it is in talks with a third party which had expressed interest to make a bid of up to 100% for Portek. We believe this development significantly raised the probability of a bidding war between the 2 contenders. Portek’s ports are highly coveted given the scalability of its port operations and the growth potential of the emerging countries that it operates in. ICTSI has since amassed a 16.93% stake in Portek and the Securities Industry Council has ordered the potential third party to make its intention known by the 50th day of the despatch of ICTSI’s offer documents.

Fair value of $1.56/share. We derive a fair value of $1.56/share using a sum-of parts approach, valuing its port business at 14x, in line with its regional peers’ average. We observed that recent port deals are sealed at P/E multiples ranging from 20-26x. We value the engineering business at 10x P/E. Portek’s attractiveness as a takeover target and the potential 27% upside makes the stock compelling at current levels. Effectively, investors are paying a 2-3 cents option for the opportunity to partake in the upside of a higher offer price. The downside risk of the offer lapsing is mitigated by the undemanding valuation of the stock.

Second Chance: Revaluation gains expected to boost results (DMG)

(BUY, S$0.38, TP S$0.53)

Higher than expected revaluation gains. Second Chance had announced that it expects to report a much higher YoY revaluation surplus on its properties in FY11. At our recent Corporate Day, management revealed that it recently acquired some office properties in 4QFY11. On top of that, its core business operations have been improving (9MFY11 EBIT was up 18% YoY), which is likely to continue into 4QFY11. We have raised our 4QFY11 earnings estimates to S$11.1m (previously S$5.3m), taking into consideration the higher revaluation gains. We expect Second Chance to maintain its high dividend payout of at least 3.8 S¢/share. Maintain BUY and TP of S$0.53, based on DDM methodology.

Adds office properties to its portfolio. Second Chance recently purchased a few office units at International Plaza and Middle Road for a total of ~S$13m (~5,300 sq ft in total). These properties are expected to yield an additional S$1m rental income.

Intends to focus more on real estate, but will keep its retail business. Management intends to focus on real estate activities, going forward. These could take the form of property developments (via joint ventures), developing and managing budget hotels (likely in Malaysia), acquisition of warehousing / storage space and picking up distressed properties. It is open to the type of real estate opportunities that may knock on its door. However, management intends to retain its profitable retail apparel and gold businesses.

Maintain BUY with TP S$0.53. We think management is likely to maintain its high dividend policy. Based on DDM methodology, we have a TP of S$0.53. At current levels, it implies an attractive dividend yield of 10%. Maintain BUY for a fashion retailer with an arm in property investment.

Piece by piece, Malaysia builds new metropolis by Singapore

(Reuters) - Like a giant Lego project, Malaysia is assembling the pieces of an investment zone that is destined to become a metropolis about three times the size of neighboring Singapore.

An area of mostly rubber and oil palm plantations covering 2,217 square km (855 square miles) in the southern state of Johor is being turned into international schools, hospitals, hotels, theme parks, luxury homes and a financial district.

One of the first pieces of the development, appropriately enough, is a Legoland theme park. Due to open next year, it will offer 40 interactive shows and rides, along with 15,000 giant lego models of famous buildings. It will be the first of three planned theme parks in Iskandar Malaysia, named after the late sultan of Johor.

Launched on November 4, 2006, Iskandar is one of five "economic growth corridors" Malaysia is developing over the next decade. They are part of an "Economic Transformation Programme" that aims to propel Malaysia into a fully-developed nation by 2020 by lifting per-capita incomes to $15,000 from $6,900 in 2009.

"At the moment, manufacturing contributes 70 percent of the region'seconomy," said Ismail Ibrahim, chief executive of the Iskandar Regional Development Authority (IRDA). "We hope upon reaching maturity at 2025, the main contributing sector would be the service sector."

Far from being a rival to Singapore, Iskandar is courting investment from the rich city-state just across the Straits of Johor. Incentives include corporate and personal income tax breaks, and exemptions from the so-called "bumiputra rules" -- foreign investors are allowed to own 100 percent of their businesses, with unrestricted hiring of foreign "knowledge workers."

Like different colored Lego blocks, Iskandar will feature various zones -- financial, creative media, tourism, education and healthcare in the service sector; electrical and electronics, petrochemical and food processing among others in manufacturing.

It had already attracted RM 69.43 billion ($23 billion) in promised investment by last December. About 38-39 percent of that sum has been "realized," Ismail told reporters in May.

Iskandar is targeting another RM 13 billion annually and a total of RM 73.3 billion over the next five years following the completion of key infrastructure, education and tourism projects by next year. Foreign investment has accounted for about 41 percent of the total so far.

Improving relations between Singapore and Malaysia are key to the Iskandar investment climate as the island state is expected to be the single biggest investor in the development.

Singapore left the Malaysian Federation in 1965 and ties since then have hit many a rough patch. But last year they signed agreements to settle long-standing issues, including railway land bisecting Singapore owned by Malaysian rail operator Keretapi Tanah Melayu (KTM).

CIMB research regional economist Song Seng Wun said that Singapore's private sector companies have been the biggest and oldest investors in Johor, but what was missing was strong participation from government-linked companies.

"Singapore Inc. has been cautious about investing in Johor," Song said. "They are taking it one step at a time, looking for policy consistency from Malaysia and Johor, and observing how Singapore and Malaysia work together on transfer of railway land and other previous agreements."

Britain's Newcastle University Medical School is one of six colleges planned in an "Educity" complex in Iskandar, and will admit its first batch of students later this year. British boarding school Marlborough College will open this year, as well.

A 355-acre (144-hectare) financial district will host corporate office towers, premium hotels, high-end residential properties, premium retail complexes and luxury service apartments.

Malaysia is also aiming to get a piece of the growing Asian film production market with the new Pinewood Iskandar Malaysia Studios, a joint venture between Malaysia sovereign wealth fund Khazanah and Pinewood Shepperton, the British film studio behind the Batman and James Bond movies.

Khazanah will also work with Singapore's sovereign wealth fund Temasek Holdings to develop a wellness township in Iskandar, offering medical facilities, holistic health services and alternative medical treatment.

http://www.reuters.com/article/2011/07/07/us-malaysia-metropolis-idUSTRE7660VO20110707

Tiger Airways - Tiger Australia potentially grounded up to August 1 (DBSVickers)

SELL; S$1.045; Price Target: S$ 0.90

According to press reports, the Civil Aviation Safety Authority of Australia (CASA) has announced that it will be applying to the Federal Court in Melbourne tomorrow morning to seek an order to extend the license suspension of Tiger Airways Australia further from July 9 up to August 1, at least. This is not unexpected, as we had highlighted the possibility of the fleet suspension being extended in our latest report. The possible extension was sought despite meetings between Tiger's top executives and CASA investigators during the week.

CASA has sought the order to seek extension, as it will not been able to complete its investigations within the initial 5-working day period. If the court allows the extension and CASA is able to complete investigations before Aug 1, and is satisfied with Tiger's safety mechanisms, it may be possible for Tiger Australia to resume operations earlier. However, Tiger Australia has already stopped selling tickets on its website, and given the lack of forward ticket sales, we do not foresee it to resume operations before Aug 1 even if the regulator is satisfied before then.

In terms of impact, this means at least S$8m in direct losses for the 4 weeks of suspension (S$2m per week as estimated earlier by management), which is within our earnings estimates cut earlier this week. However, there could be more losses that are harder to assess like the A$2.25m fine the South Australian government is seeking to impose on the airline for breaching some agreements. There is also complaint from the consumer watchdog over domestic ticket sales during the initial days of the grounding. There will be maintenance costs involved as well in getting the grounded fleet back in the air. Overall, we reckon there could be further downside to our earnings estimates as the crisis plays out over the following weeks and we maintain our SELL recommendation at a TP of S$0.90.

ASL Marine: Secures orders worth S$131m (OCBC)

ASL Marine (ASL) announced that a wholly-owned subsidiary has secured new shipbuilding contracts worth a total of about S$131m for the construction of 11 vessels (two emergency response and rescue vessels, and nine AHT/AHTS vessels). These vessels are expected to be progressively completed between 4Q12 and 3Q13. The emergency response and rescue vessels are repeat orders from a customer and will be built at the Singapore shipyard, while the AHT/AHTS vessels will be built in the Guangdong shipyard. New shipbuilding orders have remained slow and it is encouraging to see that these new orders will provide some shipbuilding work for the group till 2013 (as at 31 Mar 2011, ASL had an outstanding shipbuilding order book from external customers of about S$218m for 41 vessels with deliveries till 2012). We like ASL's relatively flexible business model in which it can build vessels for its own chartering activities and increase its focus on ship-repair when the shipbuilding segment is weak. However, the external environment remains challenging for now. Hence, we maintain our HOLD rating and fair value estimate of S$0.67 on ASL.

Tat Hong Holdings: Management more confident about prospects (OCBC)

Australia's slow recovery. We recently met up with the Tat Hong Holdings Ltd's management for an update. Compared to a couple of months ago, the management is more confident about its prospects; the company is currently seeing some improvements in its business, with a good number of cranes being rented out. However, management informed us that the recovery of its Australia's business, which formed 60% of its total revenue for FY10, would take some time. This is in line with our expectations. As mentioned in our report dated 7 June 2011, we believe that actual reconstruction work in Australia would come through later rather than earlier due to damaged equipment and the lengthy planning and tender process. What this also implies is that we are unlikely to see a sharp pickup in its results in the near term. However, we remain optimistic about its Australia's operations over the next 12 months due to the large number of reconstruction activities and energy-related projects.

Hong Kong's mega infrastructure projects. We believe that a potential catalyst may come from Hong Kong, due to the large number of upcoming infrastructure projects, such as the Guangzhou-Hong Kong Express Rail and Kai Tak Development Plan (See Table 1). Several of these projects are expected to commence in 2011, and should bolster crane demand over the next several years. As such, we believe that Tat Hong - one of the largest crane companies in Asia and the world - would be one of the prime beneficiaries.

Change in CFO. Meanwhile, Tat Hong's CFO Lester Wong Hein Jee has resigned to pursue other career opportunities. He will be replaced by Lional Tseng, former CFO of infrastructure & building development services provider CPG Corporation Pte Ltd. With more than 30 years of experience in finance, tax and treasury management in real estate development, construction and engineering consulting businesses, Mr. Tseng is suitably qualified to assume CFO responsibilities. Mr. Tseng will join on 1 August 2011, a month before Mr. Wong's last day of service on 31 August 2011; this arrangement should help minimize disruptions to the company's operations.

Cautiously optimistic, maintain HOLD In our view, the recent change in CFO is unlikely to cause disruptions to Tat Hong's operations. Although the company is seeing some improvements in its business, the recovery of its Australia's operations remains slow. We maintain our HOLD rating with a fair value estimate of S$0.82. Potential catalyst could come from Hong Kong's mega infrastructure projects.

Hyflux Ltd - Takeaways from Singapore International Water Week (CIMB)

OUTPERFORM Maintained

S$2.09 Target: S$2.76

Singapore International Water Week 2011

Hyflux: actionable stock idea from SIWW. We came away from the Singapore International Water Week (SIWW) 2011 excited. This year’s theme is “Sustainable Water Solutions for a Changing Urban Environment”, reinforcing the message from keynote speaker PM Lee about water self-sufficiency being Singapore’s strategic priority. More actionable is our bullish view on Hyflux. As a co-located event of SIWW, PUB and Hyflux marked the ground-breaking for Singapore’s second and largest water desalination project. Suffice to say that Hyflux stood out from the array of international companies participating in this year’s event. Our earnings estimates and target price of S$2.76 are intact, based on sum-of-the-parts valuation. We anticipate re-rating catalysts for Hyflux from fresh order wins and opportunities arising from its JV platform in China.

The news

SIWW is the global platform for water solutions that brings together policymakers, industry leaders, experts and practitioners to address the challenges of the water world, showcase technologies, discover opportunities and celebrate achievements.

Ground-breaking of Tuas seawater desalination plant. The national water agency, PUB, and Hyflux marked the ground-breaking for Singapore’s second and largest water desalination project, a co-located event of SIWW 2011. The ground-breaking ceremony took place at the Suntec International Convention and Exhibition Hall.

Comments

Prime Minister Lee Hsien Loong, who had delivered the inaugural Water Conversation earlier in the week, spoke about self-sufficiency as a strategic priority of the nation. Currently, NEWater meets 30% of Singapore's water needs. With ramped-up capacity, it will meet 50% of Singapore’s water demand by 2060. Desalinated water, with added capacity from the new TuaSpring Desalination Plant, is expected to supply 30% of the country’s water needs by 2060, up from the current 10%.

Operationally ready in 2013. The ground-breaking took place three months from the day PUB and Hyflux’s wholly-owned subsidiary, TuaSpring Pte Ltd, signed their water purchase agreement to supply PUB with 70m gallons of desalinated water a day for 25 years from 2013 to 2038. The plant will be constructed under Design, Build, Own and Operate (DBOO) and is expected to commence operations in 2013.

The plant will feature the world’s second-largest ultrafiltration pre-treatment membrane facility, incorporating Hyflux’s proprietary Kristal® ultrafiltration membranes. Following pre-treatment, salt water will undergo a 2-pass reverse osmosis treatment process to remove the salt from the water, leaving fresh pure water. This water then undergoes a post-treatment process for re-mineralisation before being delivered to PUB for distribution to households and industries in Singapore.

High-value contract. Hyflux has a desalination project portfolio of 936,000 m3/day globally before this project. Recall that the value of this project is S$890m (EPC portion S$750m). The water will be supplied to PUB at a first-year price of S$0.45 per m3, based on warranted capacity of 318,500 m3 per day. Hyflux will also be constructing a 411MW combined cycle gas turbine power plant to supply electricity to the desalination plant. Excess power will be sold to the power grid.

Clever funding options. From the many conversations we have had with clients and investors since the announcement of the TuaSpring Desalination Plant, we gathered that while most are excited about this project, many seem unsure how Hyflux would go about financing the S$890m plant, plus its ancillary 400-megawatt power plant.

Hyflux had raised S$400m through Class A Preference Shares in April. The bulk of the money will fund this project. With the preference shares already issued (non-dilutive), we suspect the rest of the equity portion could be raised from divestment income and internal cash flows.

Earlier this week, the group said it had secured a S$150m financial package for the desalination plant. The package was arranged by DBS Bank Ltd, Mizuho Corporate Bank, Ltd and Sumitomo Mitsui Banking Corporation. Hyflux also mentioned that it is on track to securing financing for the power plant that will be installed on site.

World's cheapest desalinated water. Notably, the Tuas II desalination plant is Hyflux’s second-largest ultra-filtration membrane installation project after its Magtaa desalination plant in Algeria (world’s largest membrane-based desalination plant). The new Tuas plant will be located on the same site as Hyflux’s existing SingSpring desalination plant. Hyflux would be able to leverage such proximity to deliver higher operating efficiencies.

As the group aims to incorporate technology which will 'revolutionise' the energy efficiency of its desalination process, to further lower water tariffs, management is confident that this desalination plant will also produce the world's cheapest desalinated water at 45cts per m3 when completed. We believe the eventual success of the desalination project (not to mention the track record of the Magtaa desalination plant) could open more doors for Hyflux in the international arena.

It’s not all about Singapore. Thanks to its flexibility, the group managed to secure S$850m worth of projects (both in China and Singapore) in 1Q11, with the biggest (S$750m) being the Tuas II desalination plant. It is now looking at how to mobilise more resources to China to boost its order book of S$2.25bn (S$1.25bn EPC, S$959m O&M). The biggest tailwind for Hyflux in China remains the country’s relentless efforts to tackle its water-security issues.

Valuation and recommendation

We are keeping our earnings estimates and target price of S$2.76, still based on sumof-the-parts valuation. With prospects of further margin improvements and order-book momentum (particularly in China and O&M segment), we remain upbeat. We anticipate re-rating catalysts from fresh order wins and opportunities arising from its JV platform in China.

F & N (DBSVickers)

BUY; S$5.85; Price Target: S$ 7.20

F&N forms 50:50 JV with Sekisui House in Australia to take stake in Central Park

What's new?

F&N subsidiary, Frasers Property Australia (FPA) announced this morning that it has entered into a 50:50 JV agreement with Sekisui House, Ltd. to develop the Central Park project located in Sydney, Australia. This will involve the establishment of 2 unincorporated JVs (UJVs), which will acquire the rights to develop the project, and thereafter to recognise proceeds and profits from the development. The consideration to be paid by the UJVs to FPA is A$460m.

This transaction will result in a net gain of c.S$52m.

Central Park is a mixed-use 5.8 hectare development located in central Sydney and will comprise c.1,900 apartments, student housing, hotel, a 16,000 sqm retail centre and a 75,000 sqm commercial office block. FPA bought the site in 2007 for A$208m, and obtained masterplan approval in early 2009.

Apartments have been launched in phases and sales todate numbered over 500. We understand average selling price was at A$1,100 psf.

Our view:

Mildly positive, net gain of c.S$52m and to drive assets recycling. We see this piece of news as mildly positive for F&N given that it helps to lock in some gains and accelerate its asset recycling drive. As mentioned above, this transaction will net a gain of c.S$52m which we believe should be booked in this current financial year (FYE Sep'11). Furthermore, there could be more future collaboration between F&N and Sekisui as their partnership extends beyond Singapore. This also adds credibility to the quality of assets being developed by F&N in Australia. Maintain BUY with TP S$7.20.

ASL Marine Holdings Ltd - Orders trickling in (CIMB)

NEUTRAL Maintained

S$0.61 Target: S$0.70

S$131m shipbuilding contracts

ASL has secured S$131m of contracts for the construction of 11 vessels, for completion between 4Q12 and 3Q13. We make no major adjustments to our order recognition and keep our earnings estimates. The latest orders do not mark a strong inflection point for Singapore yards, in our view. Instead, we see a pronounced recovery in the OSV sector only in 2012, which could lift all boats. We remain Neutral on ASL with an unchanged target price of S$0.70 (based on 7.5x CY12 P/E, its 7-year trading average). ASL is trading at only 0.7x P/BV but this is counter-balanced by its tepid ROE and earnings growth. We would revisit the stock on stronger-than-expected shipbuilding order wins and ship repair/conversion jobs.

The news

ASL has secured S$131m worth of contracts for the construction of 11 vessels comprising two units of emergency response and rescue vessels and nine anchor handling towing/supply vessels. The vessels are expected to be completed between 4Q12 and 3Q13. The two North Sea standard emergency response and rescue vessels are repeat orders from a customer and will be built at ASL’s Singapore yard. The nine anchor handling towing/supply vessels will be built at its Guangdong yard in China.

Comments

Keeping our earnings estimates. Although ASL had only secured S$55m of orders in FY11 (falling short of our order target of S$100m), the earlier-than-expected orders of S$131m coming at the beginning of FY12 have made up for the shortfall. Hence, we make no major changes to our recognition schedule and keep our earnings estimates. We are expecting S$180m of shipbuilding orders for FY12.

Expecting a pronounced recovery in OSV sector in 2012. While enquiries are healthy, management said negotiations to conclude newbuild contracts are taking more time now and are more tiresome vs. the heyday of 2006-08. Keeping in mind the different dynamics of each OSV class, the latest orders do not mark a strong inflection point for Singapore yards, in our view. Instead, we see a more pronounced recovery in the OSV sector only in 2012, which could lift all boats. Interestingly, management is more conservative and expects the rebound to take place in 2013.

Valuation and recommendation

Maintain Neutral and target price of S$0.70, still based on 7.5x CY12 P/E (7-year trading average). Although ASL is one of the cheapest small-cap stocks in the sector (at 0.7x P/BV), its ROE and earnings growth are tepid. Hence, we remain Neutral and would revisit the stock on stronger-than-expected shipbuilding order wins and ship repair/conversion jobs.

TRC Synergy - Wildcard coming true? (HLIB)

Price Target: RM2.00

Share price: RM1.76

News:

 The Brunei Economic Development Board (BEDB) announced that the Sultan of Brunei has consented to the establishment of a US$2.5bn oil refinery and aromatics cracker project located in Pulau Muara Besar (PMB). Zhejiang Hengyi Group Co will undertake this project and will be offering a Bruneian equity participation of up to 30%.

Comments:

 To recap, TRC’s 26% associate (74% is owned by TRC’s Brunei partner), PetroBru, has been pursuing this project since 2008 and developments for this project took a pause in Jun-09 after the detailed feasibility study was completed. This oil refinery is part of the overall PMB development and BEDB is targeting for PMB’s port facilities to be ready in 2013.

 Although PetroBru has yet to officially obtain the Bruneian equity stake for this venture, rough calculation on the size of this investment based on TRC’s effective stake of 7.8% is ~RM580m, representing 1.7x TRC’s market cap, which is larger than TRC itself.

 TRC may also have the upper hand in participating construction works for the refinery by virtue of its indirect holdings in this venture. The design and engineering scope for the refinery has been awarded to Sinopec and construction activities are expected to start after the conclusion of the detailed engineering study which is expected to take place over the next 12 months.

 Another bright spot for TRC is the infrastructure and land reclamation projects in PMB which is worth ~RM4.9bn. The size of the island is expected to expand from 950 ha to ~2,000 ha. TRC, with its decent track record stands a good chance in winning some contracts in PMB. Meanwhile, the company will be busy with their existing order book of RM1.2bn (see Figure #2), which translates to 3.2x FY10’s revenue.

 On a separate note, TRC’s ex-date for its 1-for-2 share split, followed by 1-for-5 bonus issue and 1-for-5 free warrants corporate exercise falls on 13 July (Wed).

Risks:

 1) Single project concentration risk in the LRT project; 2) political and regulatory risk (both local and overseas); 3) rising raw material prices; and 4) unexpected downturn in the construction sector.

Forecasts:

 Unchanged as it is still too early to impute any earnings from the oil refinery venture.

Rating:

 Maintain BUY as current order book provides clear earnings visibility and should show sequential earnings growth going forward. PMB could be an added bonus. Strong balance sheet with net cash of RM0.84/share.

Valuation:

 Target Price of RM2.00 based on 13x average FY11 and FY12 earnings maintained.

Boustead Holdings (HLIB)

Target: RM7.71/7.01 (ex bonus)

Price: RM5.93/5.39 (ex bonus)

Div in Specie, Offer for Sale & Part Divestment of Pharma + Bonus Issue

News:

 To meet Pharmaniaga (Pharma) public shareholding spread, Boustead proposed: 1) dividend in specie of Pharma shares on basis of 1-for-57.5. Shareholders with less than 5,750 shares will get cash (total RM1.7m); 2) restricted offer for sale of Pharma shares to shareholders (excluding LTAT) on basis of 1-for-24; 3) divestment of 5.5m, 4m and 8m Pharma shares to LTAT, Boustead directors and employees and other investors (not identified yet); 4) Pharma will undertake a bonus issue of 1-for-10 after completion of the above; and 5) Boustead will also undertake a bonus issue of 1-for-10.

 Pharma shares will be priced at RM5.75 or at Boustead’s entry cost (vs. current price of RM5.90). Exercise slated for completion by end 2011.

Financial impact:

 Upon completion, Boustead’s stake in Pharma will reduced from 97.8% to 51.3%. Thus, FY12-13 EPS will reduced by circa 6% in view of lower stake but P/E still single-digit.

 Pharma will be sold at cost, thus, no profit or loss. Inflow of RM194.2m will reduce net gearing by circa 4.5%-point. Net asset per share will reduce by 10 sen to RM4.40 (before bonus issue).

 Bonus issue has no impact but may improve liquidity.

Pros / Cons

 Mildly positive as shareholders get yield pick-up of 1.69% from dividend in specie.

 Pharma is priced at 9.6x annualized 1QFY11 earnings. Boustead intends to expand Pharma business to meet requirements of the armed forces and private hospitals as well as venture into halal drugs and herbal supplements (via research capabilities of its 60-owned University of Nottingham Malaysia). Thus, shareholders will benefit from decent entry level.

Risks:

 Lower than expected revenue contributions from different divisions and/or margins falling short of expectations as well as relatively high gearing and potential dilution from cash call. Forecasts  FY12-13 EPS cut by circa 6%. RNAV cut from RM8.74 to RM8.56 largely to reflect lower BHIC shares price.

Rating: BUY

 Positives – Still undervalued (single-digit P/E), high and quarterly net dividend yield, double-digit FY11 earnings growth and market yet to fully appreciate the hidden values. Will benefit from sustained consumption (banking, property and pharmaceutical divisions) and government land deals.

 Negatives – Relatively high gearing and complicated group.

Valuation:

 Target price cut from RM7.87 to RM7.71 based on 10% holding company discount to estimated SOP of RM8.56.

Asiatravel.com (KimEng)

Up-to-date in 60 seconds

Background: Asiatravel.com is the best-known online travel and hotel reservation service provider in Singapore. However, its network extends well beyond Singapore to 79 countries in Asia, Europe, Americas, the Middle East, India and Africa. Its B2C website, www.asiatravel.com, facilitates consumer reservations of hotels, flights and tour packages, including day tours of Singapore and sale of theme park tickets.

In a nutshell: Asiatravel is transforming from a niche online hotel reservation site into a total travel reservation service provider. However, aggressive promotional and start-up costs will hurt margins in the short term although in the long run, the transformation should be positive.

Key ratios…

Price-to-earnings: 53.5x

Price-to-NTA: 3.1x

Dividend per share / yield: $0.006 / 1.5%

Net cash/(debt) per share: $0.012

Share price S$0.39

Issued shares (m) 241.6

Market cap (S$m) 94.2

Free float (%) 69%

Recent fundraising activities Nil

Financial YE 30 March

Major shareholders Boh Tuang Poh - 11.4%, Goh Khoon Lim - 9.4%, Vision Capital - 5.1%, Prudential Asset - 5.0%

YTD change -10%

52-wk price range $0.36-0.49

Our view:

Recent results poor... Since our last update, Asiatravel has announced two quarters that were bottomline-poor but not entirely surprising given its current emphasis on driving topline growth at the expense of margins. A&P expenses as well as staff salaries increased substantially due to the aggressive expansion in new products and new sales channels, including a new group-buying website, www.atcrazy.com, for products such as tour tickets, meal vouchers, hotel and flight packages and spa products.

…but topline growth strong. Still, the transformation has generated quite robust topline growth. For example, although Asiatravel suffered a $0.8m net loss in 2QFY Mar11, topline growth jumped 35% YoY, a surprisingly strong result given that the March quarter is a traditionally weak period. In addition, weakness this year would have been exacerbated by external events such as political turmoil in the Middle East and natural disasters in Japan.

Patience needed. Asiatravel’s current revenue growth strategies should help to drive faster growth in business volume and margins in the long term. For instance, it receives a higher service fee for sale of airfares compared to hotel and package sales. But the need to spend on advertising and promotions will still weigh on the bottomline in the next few quarters before positive returns are possible. Meanwhile, Asiatravel is considering M&A or other strategic alternatives to enhance value for shareholders.

Wilmar International (KimEng)

Event:

Wilmar’s share price has been range-bound over the course of the year, with no significant catalysts to drive it one way or the other. The stock was significantly de-rated late last year due to a weak run of quarterly earnings. While its earnings profile has seemed to stabilise, we do not see any positive earnings drivers on the horizon. Hence, we maintain our HOLD rating and target price of $5.31.

Our View:

Soft commodity prices have been on the slide over the past two months, in line with the broader economic climate, but are now showing signs of a pickup. On average, CPO and soybean prices are currently trending below our full-year assumptions, and this is a positive for Wilmar, as it is a net buyer of these commodities for its downstream production.

In the last reported quarter, soybean crushing margins had shown some improvement and we expect this trend to continue. However, the operating environment remains difficult with muted sales volumes. While average selling prices did show some improvement, price caps on cooking oil are still in place, thus limiting upside despite lower input costs.

On the acquisition front, Wilmar has also been uncharacteristically quiet, with only a small A$115m purchase in the past few months. Early last month, its Australian sugar subsidiary Sucrogen acquired Proserpine Mill to increase its sugar milling capacity from 15m tonnes to 17m tonnes, and raise overall raw sugar production by 10%, or 2.2m tonnes. Wilmar controls about half of Australia’s total raw sugar supply.

Wilmar’s plans to establish sugar plantations in West Papua are also progressing slower than our initial expectations, due to administrative issues. We have not yet factored any near-term contributions from this into our forecasts.

Action & Recommendation

We caution that the recovery in Wilmar’s oilseeds and grains business is still shaky. Using a 15x multiple on FY11 forecasts, our target price stands at $5.31. Although the US dollar has stabilised, the earnings multiple valuation also makes the stock susceptible to a depreciating greenback, as Wilmar reports in US$. Maintain HOLD.

ASL Marine (ASL SP) – Shipbuilding contracts worth $131m in the bag (KimEng)

Previous day closing price: $0.62

Recommendation: BUY (maintained)

Target price: $0.85 (maintained)

ASL Marine announced that it has secured new shipbuilding contracts worth about $131m for the construction of 11 vessels. These include two units of emergency response and rescue vessels and nine units of anchor handling towing supply (AHTS) vessels. According to management, these vessels are scheduled to be completed between 4Q12 and 3Q13.

We understand that the two units of North Sea standard emergency response and rescue vessels are repeat orders secured from an undisclosed customer and will be built at the group’s shipyard in Singapore. The nine AHTS vessels, however, will be built at its shipyard in Guangdong Province, China.

While we think that ASL is well-positioned to benefit from the potential return of an OSV capex cycle, shipbuilding gross margin is expected to remain slim (under 10%) due to the keen competition among the regional shipyards. With this latest contract win, we estimate ASL will have a net orderbook of $300m, which should keep its yard busy in the meantime, thus offsetting the high fixed costs.

Trading at only 0.73x FY12 P/B, the stock remains undemanding on cheap valuation. We maintain our BUY recommendation and target price of $0.85.

TIGER AIRWAYS (Lim&Tan)

• Short term, the stock is expected to continue to come under pressure resulting from the extension of the grounding of Tiger Australia’s domestic flights till end July (instead of July 9th) and to some extent the A$2.25 mln repayment to the South Australian government.

• Taking a longer term view, we believe it is too early to seek comfort in Tiger seemingly coming under SIA, which has a 33% stake in Tiger.

• We believe SIA has little choice, given so much is at stake.

• Tiger, a Singapore incorporated company, with SQ, itself 54.9% owned by Temasek, as its largest shareholder, is the first airline to be grounded for safety concerns, by the civil aviation authorities of Australia, a first world country. (One could only recall Garuda being barred from flying to EC countries several years ago after several crashes.)

• Tiger has appointed Joe Pillay, one of the pioneers at SQ, as non-executive chairman. Chin Yau Seng, former head of cabin crew operations at SIA was appointed acting CEO of Tiger a few days ago.

• But there are serious concerns / uncertainties over Tiger’s future with SIA “in charge”.

• We would, for a start, rule out SIA privatizing Tiger because of “political sensitivity”, which Temaseklinked companies would be familiar with. SIA would surely recall the problems it encountered in India trying to do a JV with the Tata Group.

• And having plans for a budget airline for the long haul routes, one would not expect SIA to make compromises for the sake of Tiger.

• We therefore expect SIA to spend some time deliberating what to do with Tiger, eg how to grow it? One illustration, a budget airline can fly to Gatwick.Stansted instead of Heathrow; but there is only one airport in Bangkok; and landing slots are hard to come by, if at all.

• As such, we would not be in haste to bottom fish just yet.

SECOND CHANCE PROPERTIES (DMG)

BUY

Price S$0.38

Previous S$0.53

Target S$0.53

Revaluation gains expected to boost results

Higher than expected revaluation gains. Second Chance had announced that it expects to report a much higher YoY revaluation surplus on its properties in FY11. At our recent Corporate Day, management revealed that it recently acquired some office properties in 4QFY11. On top of that, its core business operations have been improving (9MFY11 EBIT was up 18% YoY), which is likely to continue into 4QFY11. We have raised our 4QFY11 earnings estimates to S$11.1m (previously S$5.3m), taking into consideration the higher revaluation gains. We expect Second Chance to maintain its high dividend payout of at least 3.8 S¢/share. Maintain BUY and TP of S$0.53, based on DDM methodology.

Adds office properties to its portfolio. Second Chance recently purchased a few office units at International Plaza and Middle Road for a total of ~S$13m (~5,300 sq ft in total). These properties are expected to yield an additional S$1m rental income.

Intends to focus more on real estate, but will keep its retail business. Management intends to focus on real estate activities, going forward. These could take the form of property developments (via joint ventures), developing and managing budget hotels (likely in Malaysia), acquisition of warehousing / storage space and picking up distressed properties. It is open to the type of real estate opportunities that may knock on its door. However, management intends to retain its profitable retail apparel and gold businesses.

Maintain BUY with TP S$0.53. We think management is likely to maintain its high dividend policy. Based on DDM methodology, we have a TP of S$0.53. At current levels, it implies an attractive dividend yield of 10%. Maintain BUY for a fashion retailer with an arm in property investment.

Tiger Airways: Tiger Australia grounded till Aug 1 (DMG)

(SELL, S$1.045, TP S$0.76)

CASA is applying to extend Tiger’s grounding till Aug 1 to which the latter says it will not oppose. Tiger Australia’s CEO will step down on July 31 with current Group CEO Tony Davis taking over. We estimate direct losses of S$32m (ie. S$23m in loss of ticket sales and S$9m in costs) arising from the ban. We believe recent events will have negative repercussions on demand hence cut our capacity assumptions by -2%/-6% for FY12/13, reduce our load factor by 4ppts to 81% which in turn reduces our traffic by -5%/-10% for FY12/13 respectively. Our earnings are cut by -66%/-50% for FY12/13. We are setting a fair value of S$0.76 for Tiger, based on 2x its FY12 price to book, which is the average that its LCC peers are trading at. This translates into 24x/14x FY12/13F P/E. Re-iterate SELL.

CASA seeks to extend grounding till Aug 1. Australia’s Civil Aviation Safety Authority (CASA) is applying to the Federal Court to seek an extension to Tiger’s grounding till Aug 1 to which Tiger says it will not oppose. The extension is to facilitate investigations over two incidents in June where pilots flew too low approaching Melbourne airports. Following this announcement, Tiger Australia’s CEO Mr. Crawford Rix will step down on July 31 with current Group CEO Mr. Tony Davis taking over. Meanwhile newly appointed Mr. Chin Yau Seng (ex-CEO of SilkAIr) will take the helm at Tiger Singapore. We view these management changes positively as it reflects Tiger’s commitment to resolve its current problems.

Impact on operating stats. We believe recent events will have negative repercussions on demand and hence prompt Tiger to delay delivery of two A320s in FY12 & FY13. We are cutting our capacity assumptions by -2%/-6% in FY12/13, reducing our load factor by 4ppts to 81%, which in turn reduces our traffic by -5%/-10% in FY12/13.

Financial impact. We estimate direct financial losses of S$32m arising from its prolonged grounding (S$23m in loss ticket sales & S$9m in costs). Our revenue is lowered by -5%/- 7% and net profit lowered by -66%/-50% for FY12 & FY13 respectively. There could be further downside risks to earnings from higher operational costs in terms of staff costs and higher marketing costs in an attempt to repair its reputation.

Re-iterate SELL. At last close, Tiger is trading at 34x/19x FY12/13F earnings and 2.8x/2.4x FY12/13F P/BV. We are setting a fair value of S$0.76 for Tiger based on 2x its FY12 P/BV, the current multiple that its LCC peers are trading at. This translates into 24x/14x FY12/13F P/E. Re-iterate SELL.

Strong demand by funds for Bumi Armada stock

(KUALA LUMPUR) Bumi Armada Bhd received orders for about 25 times the stock it's selling to institutional investors in Malaysia's biggest initial public offering (IPO) this year, two people with knowledge of the matter said.

The sale to local and foreign institutions accounts for more than half of the IPO, with retail investors and indigenous institutions making up the rest.

The people, who asked not to be identified because the information is private, said demand from fund managers will probably allow Bumi Armada to sell shares at the top end of a range marketed to investors. The oil and gas services company controlled by Malaysian billionaire T Ananda Krishnan plans to raise as much as RM2.77 billion (S$1.13 billion), people familiar with the matter said on June 27.

Sales to institutional investors are scheduled to close tomorrow, according to Bumi Armada's offering prospectus.

Bumi Armada said on June 30 that it has lined up so-called cornerstone investors including Great Eastern Life Assurance (Malaysia) Bhd and Prudential Fund Management Bhd which will buy a combined 10.2 per cent of the shares.

The FTSE Bursa Malaysia KLCI Index has risen 7 per cent from its March 15 low this year.

Twelve of the 18 companies that began trading in Malaysia this year have advanced from their offer price.

Bumi Armada, which provides vessels and floating platforms used by the energy industry, is attempting Malaysia's largest IPO since Petronas Chemicals Group Bhd raised a record RM12.8 billion in November.

CIMB Investment Bank Bhd, Maybank Investment Bank Bhd, RHB Investment Bank Bhd, Credit Suisse Group AG and CLSA Asia-Pacific Markets are arranging Bumi Armada's IPO. -- Bloomberg

2011下半年6大投资策略

2011年7月3日，周日。金融海啸前后，联储局创造了4万亿美元资金，2008年中国央行提供了4万亿元人民币刺激经济方案，2009年至今的欧债危机及2011年3月日本海啸，央行皆滥发货币……

过去五年，全球新增货币超过8万亿美元，大部分无法被正常商业活动吸收，相信有80%或以上资金被用作“炒卖”(纽约证券交易所80%营业额来自电脑程式买卖的high frequency trade(HFT)。即在极短时间内完成买入及卖出，其中50%买卖集中在100只股份身上)。HFT令不少散户离开股票市场，因为他们不适应。

HFT买卖集中在100只大蓝筹股身上，令二三线股被冷落。今年年底前部分港股将在上海交易所国际板挂牌，理论上港股前景仍然秀丽，但上半年不少上市民企股价表现令人失望，原因是中国正在收缩信贷。

内地生产商面对原材料涨价、工资大升但产品却无法加价的问题，加上美国MuddyWaters(浑水公司)对内地民企股账目的质疑，引发不少海外上市民企股股价大跌。牛市二期从来不易玩，去年11月至今，恒生指数在21500点到25000点之间上落，但跌幅超过50%的股份却比比皆是。

二线股续坐过山车

拣股一向是散户弱项(资料不足、时间有限、资金有限)。过去八个月虽然仍不乏升幅超过100%的二线股，但亦有大量下跌超过50%的二线股，香港惠理基金(Value Partners)总裁兼首席投资官谢清海说：大部分上市的民企股都是垃圾。

如何在垃圾堆中挑选出优质股十分困难。至今为止投资市场资金仍充足，但值得投资的项目则愈来愈少，上半年二线股大升大降的情况，相信下半年仍会继续，拣股不炒市仍是下半年投资策略。

不同行业有不同表现，拣股莫炒市仍是下半年大方向。不要相信什么双底衰退，牛市一旦出现往往以年为单位；牛市第一期通常只维持6个月到12个月便结束，但牛市二期十分长，两年或以上是最短要求；反之牛市三期往往只有3个月到9个月。牛市二期是炒上落市、个别发展。在牛市二期，就算移动平均线出现“死亡交叉”亦不重要。

美国经济在2009年6月结束衰退，通常一个经济繁荣期最短4年，最长可达18年。道指自2009年3月回升后牛市已开始。

2009年及2010年在本港上市的企业纯利增长50%到100%没有什么困难，自然可支持这类公司股价在2009年及2010年急升(部分二线股价升幅接近10倍)。

不过，如此高纯利增长率能否长期维持？上述质疑引发自2010年中开始部分股份的股价回落，进入牛市二期。展望今年，相信能保持纯利高增长的上市企业并不多。美股方面，2009年到2010年的美国企业纯利上升不少来自：一、downsizing(瘦身)而非营业额大升；二、美元汇价贬值令海外利润上升或原材料涨价；随着QE2结束，上述情况不能再维持，美国企业纯利又再次进入回落期。此乃典型牛市二期现象，但不似短期内会进入牛市三期。

买入持有策略已死历史证明，每次大崩溃后往往需时甚久才能恢复过来。例如1973及74年香港股灾，便要到1986年4月联交所成立后，恒生指数才再次升穿1700点；1987年10月股灾后，亦要到1994年恒指才升穿4000点；2007年10月恒指升至32000点亦不例外。2009年8月起A股与内地房地产decouple(脱钩)情况到底可维持多久？最后相信是内地资金由楼市回流股市。上述情况极有可能在今年第四季出现。

2000年1月至今11年，道指仍在12000点上下波动，证明“买入后持有”策略已死。过去11年升升降降主要由资金推动(fundflow)，例如2001年1月开始减息，最终令2002年10月起美股上升；2003年中开始加息令道指在2007年10月起大幅回落；2007年9月开始的减息虽然无法推高股市，但同年利率再次高出CPI升幅；2009年3月推出QE；2010年11月再加推QE2又将美股推高。

内地CPI料下月回落

农产品及能源价格，受天气及地缘政治影响大于其他因素。战后农产品及金属品涨价潮很少超过12年(例如1967年至1979年)。这次涨价潮由1999年起计至今接近12年，是由美元不断贬值及联储局2001年9月重返负利率时代而引发的，加上中国、印度等金砖国人口随着收入而上升，需求增加下制造出这次涨价潮，但升幅仍较1967年至1979年那次因日本及西德经济冒起而出现的涨价潮温和。

运载原材料的干货轮指数，自2008年回落后，2009年曾出现反弹，2010年至今又回落，证明生产商不敢增加存货量。代表货柜轮的Harpex货运轮指数表现好一点，2009年至今仍在上升，代表制成品出口情况至今仍不错，但与2007年高点比较仍差很远。

今年6月的内地制造业指数已跌至近50水平，加上2011年第一季日本GDP已出现负增长、美国今年第一季GDP只上升1.8%、欧元债券陷入危机，预料下半年中国GDP进入增长放缓期。

工业股被过分抛售

过去大量资金流入商品市场及股市情况将结束，代表资源股吃香的日子告一段落，不少工业股被过分抛售，PE不足10倍，相信只是大循环中的一次中期性调整，不代表衰退快开始。

检讨过去、展望将来乃制订投资策略必需步骤：

①中国由1978年至2007年完成30年制造业黄金发展期，制造业再不能单靠扩大市场去增加盈利。未来将透过技术提升、降低成本、研发新产品、重组或并购去实现价值链，建立竞争优势；并将提高行业集中度，解决产业结构不合理，减少部分行业产能过剩。适者生存的竞争早已开始，不少中小企将被淘汰出局，能够保持下来的企业，明年股价将备受看好，又到了拣股日子。

②中国城市化仍将继续。2010年中国城镇化率为46.6%，城市人口达6.22亿。估计“十二五”后城镇化率达52%，2030年达65%，此时后城市化速度才会慢下来。即中国仍享有20年左右高速城市化期。前30年城市化集中在东南沿海省市，如深圳、广州、上海及北京等；未来20年城市化将集中在中国中西部，如，成都、重庆、武汉及天津等。

中国第六次全国人口普查结果公布，过去10年(2000至2010年)人口净增长只有7390万，但流动人口2.2亿，流动方向是中西部六个省市，即四川、湖北、湖南、安徽、河北及河南出现人口萎缩；东南沿海省份如广东及浙江成为人口快速流入区，其中又以广州、深圳、上海、北京及天津为流入之最，并已出现“大城市病”。

今年4月起一线城市房价进入呆滞期，过去人口流失的六大市省市，随着中央大力开发中西部例如重庆、成都、武汉等面对人口回流，房价早已全面起动。抛售一线城市房地产进军二线城市房地产，早已是内地投资地产股的共识。

相信楼价硬着陆不会在内地发生，但会进入调整期，例如一线城市楼价下调10%到15%，二线城市楼价上升10%到15%；内地地产股进入个别发展期，互有升降。

民企股衰极必盛

③2010年中央企业控股上市公司共284家，拥有资产9.7万亿元，占上市公司总资产53%；实现利润4460亿元，占上市公司总利润52%。中国“百强”中，国企占75家，代表国企仍是主流。“十二五”规划透过调整收入分配，提高居民收入占GDP比重，令消费占GDP更重要地位，令民企有更大发展空间，如食品、饮料、服装、家电、电子消费品等行业，将成为今后经济亮点。民企股经过大幅回落后，下半年进入选择性吸纳日子，内地民企下半年应进入衰极必盛日子，投资应发掘优质民企股而非国企股。

中国从低收入国家转变成为中等收入国家，2009年起已进入经济转型期。八十年代香港经济转型成功是因为巧遇中国改革开放，令本港制造业在内地找到第二春，加上里根总统上台后采用费里德曼货币主义，令经济全球化，使1982年到1997年香港顺利从中等收入地区晋升成为高收入地区(1997年香港人均年收入达到2.8万美元)。

不过，中国转型之路并不如香港那般平坦，而且十分艰辛难行，但前途是光明的。内地经济每次出现大调整应视为吸纳便宜货机会。自1982年开始至今，每次危机过后中国经济更繁荣，此一趋势仍未改变，请记住有危才有机，哪一个富豪不是由危机中长大？

④“十二五”期间铁路投资超过3.5万亿元人民币，较“十一五”的2.2万亿元上升60%，其他如高压输电、太阳能、光优产业都获支持，趁这些股份PE仍低，可投资这类企业。

国家在财税、外汇、金融、外交等手段积极支持企业“走出去”，中国企业将积极参加新一轮全球性产业分工。走出去四大目标是：a。资源获取；b。劳务输出；c。跨国经营；d。出口产品技术含量提升。

⑤中国节能减排。支持核电和水电，协助风能、太阳能、生物能及再生能源发展，减少对火力发电的依赖，相信煤炭行业很快出现滑坡。中国受到天然资源愈来愈紧的约束(2010年中国消耗全球铝产量37%、全球锌产量46%、铜38%，但中国GDP只占全球11%)。

未来10年如果一如过去依赖大量消耗能源和资源去保持GDP高增长，地球资源也负担不来。“十二五”规划目标就是减少耗能与资源，停止过去高耗能式GDP增长(2010年中国60%GDP增长仍来自固定资产投资)。

宜沽资源及农业股

能源及资源价格经过10年牛市后，下半年会如何？5月银价大幅回落到底，是短期性调整还是泡沫爆破？6月开始拉尼娜(LaNina)现象影响渐减，下半年全球性天气渐复正常，农产品产量开始回升，软商品售价年中见顶机会极大，宜抛售资源股及同农产品有关股份。

⑥A股“高股价、高PE、高盈利增长”时代过去。随着纯利增长放缓，高PE时代结束，A股PE渐与环球性股市看齐，引发2009年8月至今A股指数出现较大跌幅。

经大幅调整后，目前A股市值率只是略高于国际股市平均PE，下半年起中国概念股又到了可以重新考虑吸纳水平。

中国政府计划在2015年前，最低工资每年提升13%或人均收入扣除通胀每年上升7%，让更多人分享经济增长的果实(去年31个省最低工资平均上升24%)，这不但对工业股不利，亦令开采资源成本急升，不利资源股。

“十二五”目标是透过工资上升，刺激消费上升及减少出口增长率。去年中国购入奢侈品达107亿美元，占全球总销量30%，较2009年上升13.8%。其中升幅最大是劳斯莱斯汽车入口，上升达600%。去年中国名车销量90.99万架(2009年72.72万架)。全年汽车销量1800万架，中国已成为全球最大汽车市场。

2010年中国外贸盈余较2009年减少6.4%，估计2011年进一步减少。中国政府希望2015年做到贸易收支平衡(即零外贸盈余)，并宣布进一步降低奢侈品入口税，但本港消费股PE太高，加上10月1日起内地降低奢侈品入口税15%，应看好内地出售奢侈品的股份，例如北京王府井等；反之香港上市的消费品股，或会有获利回吐压力。

战后的日本政府一直支持出口产业，建立起最强大的“出口产业链”，令日本货行销全球。

反之日本政府一直保护内需企业，大部分日本饮食业及零售业仍停留在家庭式经营。过去日本从出口赚回来的钱大量流入日本房产市场(1990年一个住宅单位售价需日本三代人才能完成供楼)；1987年美国股灾后，G7在“广场会议”上逼日本政府开放内需市场及让日圆大幅升值，以便外国廉价消费品进入日本市场。

1990年日股及房地产泡沫爆破，加上由1987年到1994年日圆大幅升值至78日圆兑1美元，引发日本22年经济一再出现“on and off”情况。过去30年中国政府亦一直支持出口产业，忽略内需产业，不过中国仍处中等收入国家水平，人均收入4382美元一年，不似日本1990年已进入OECD国家收入水平。

有了日本前车可鉴，中国政府不应让人民币大幅升值，以免太早进入低GDP增长期，相信下半年起人民币升值速度进一步减慢。

中国另一缺点是经济仍由国企主导，由此引发资源错配，在固定资产上投资太大及消费不足。“十二五”下，国企股过去几年跑赢大市的情况正在消失中，投资策略应转向目前被过分抛售的民企股。

家电出口遇反倾销

今年1月至5月，内地汽车产量及销量777.97万辆及791.62万辆，较去年同期上升3.19%和4.06%，换言之内地汽车产销高增长期已完成。

城市交通恶化将大量等候购车人士赶去坐地铁，情况有如1980年后香港(当年香港政府更把汽车入口税大幅上调至车价100%至150%，从此香港汽车销量进入低增长期)。

2011年起内地汽车市场进入“替代期”(即汽车旧了才买新车)，再不是过去10年买车期(由没有汽车到买车)，汽车股吸引力正在下降。

中国家电出口正面临愈来愈多“反倾销”问题。阿根廷宣布对中国电风扇抽税136.92%，有效期5年。家电生产进入门槛低，新兴国家如印度、土耳其等为保护当地工业，纷纷利用《反倾销法》对付中国出口家电，看来中国家电大量出口时代亦结束，家电股前景亦需重新评估。