Noble Group - Refocus on strong fundamentals (DBSVickers)

BUY S$1.44

Price Target : S$ 2.60

At a Glance

• 2Q11 profit of US$139.8m in line (+63% y-o-y)

• Profits boosted from higher ASP and volumes in Agriculture and Energy

• Lower margins and volumes in iron ore dragged results

• Focus on robust business fundamentals - Reiterate Buy, S$2.60 TP

Comment on Results

Noble reported 2Q11 earnings of US$139.8m (+63% y-o-y, -31% q-o-q) – in line with expectations on annualized basis. 2Q11 revenues rose 53% y-o-y (-2% q-o-q), on the back of strong contributions from Agriculture and Energy segments, higher volumes and ASP. Agriculture segment delivered strong operating income (+108% y-o-y) to US$165m, benefiting from a better business mix (larger contribution from higher value and margin products) and full contributions from Argentine crushing facility and operations in South America. Energy also recorded robust results with operating income rising 32% y-o-y (-22% q-o-q) with acquisitions in 2H10 (Northville and Sempra) contributing. Metals, Minerals and Ores (MMO) had a weak quarter however, with operating income falling 28% y-o-y (+35% q-o-q), dragged down by lower volumes in iron ore and softer margins due a weak freight market.

Noble’s balance sheet remains robust with net debt (less readily marketable inventories or RMI) to equity at 29.9%. Cash conversion cycle (adjusted for unrealized fair value gains/losses) was reported at 6 days, while net gearing (no adjustments in RMI) was calculated at 91%. The group had net debt of US$4,914m (excluding RMI) or US$1.624m (including RMI). Annualised return on opening equity eased to 17.3% from 20.5% in 1Q11.

Recommendation

We believe Noble’s strong 2Q11 results will be a catalyst for investors to re-focus on the robust fundamentals and attractive valuation of Noble rather than macro-economic risks. These include their exposure to resilient demand from emerging markets and profit contributions from investments in new businesses over the last 2 years. Trading on 10.8x FY11 PE with 3-year CAGR of 11%, we reiterate our Buy call and S$2.60 TP implying 81% upside.

STX Pan Ocean - Another quarter of losses (CIMB)

UNDERPERFORM Maintained

S$7.53 Target: S$9.80

Mkt.Cap: S$1,581m/US$1,295m

Dry Bulk Shipping

• Below; maintain UNDERPERFORM. STXPO recorded another loss-making quarter, taking its 1H11 core net loss to US$104m, significantly worse than the US$133m loss we had expected for the full year. This is because of larger-thanexpected tanker and container shipping losses. We will await this morning’s conference call before likely lowering our forecasts and target price of S$9.80, based on a 20% discount to SOP. Pending clarification on the size of vessel disposal gains, we estimate that STXPO made core operating losses at its bulk, tanker and container shipping businesses in 2Q, squeezed by high fuel costs and low freight rates. Consensus earnings downgrades as well as a weak momentum in bulk and tanker shipping rates could be de-rating catalysts, hence we maintain our Underperform rating.

• Bulk shipping in the red for second consecutive quarter. After recovering from the red during the global financial crisis, STXPO’s bulk operations had been profitable for six consecutive quarters before falling back into losses in 1Q11 and 2Q11. This coincided with a period of weak spot rates and rising bunker costs. About 80% of its contracts of affreightment (COA) do not have bunker adjustment factors, and rates have been fixed for the duration of the COAs regardless of bunker cost changes. This hit STXPO very hard in 1Q11 when oil prices spiked, and bulk shipping lost US$40m in 1Q11 alone. In 2Q11, the bulk operating loss narrowed to an estimated US$3m (this figure is subject to confirmation of vessel disposal gains), because some of the loss-making COAs may have expired. Gross margin on owned fleet recovered to 12% in 2Q from 8.8% in 1Q, while gross loss on its chartered-in fleet fell from -4.7% in 1Q to -1.6% in 2Q. For the entire fleet, gross margin recovered from -1.7% in 1Q to +1.5% in 2Q, but this was too marginal to cover the depreciation and interest expense.

• Tanker and container shipping also in the red. Tanker shipping’s 2Q operating loss increased 5x from a year ago, and almost doubled qoq on the back of low rates and imperfect fuel cost pass-through. Container shipping loss rose 50% qoq probably due to global oversupply and high fuel costs. STXPO lumped roro and LNG shipping together this quarter, and its EBIT of US$17.8m unexpectedly increased from just US$2m last year. This item requires clarity from management.

UOL Group - Results in line (DBSVickers)

BUY S$4.51

Price Target : S$ 5.19 (Prev S$ 5.40)

At a Glance

• 2Q11 net profit up 16%, in line

• Residential landbank as well as recurrent leasing and hotel income provide earnings visibility

• Maintain Buy, lowered TP to $5.19 after adjusting for value of listed holdings

Comment on Results

In line with estimates. UOL reported a 16% rise in net profit to $202.2m on a 40% jump in revenue to $455.9m. However, excluding revaluation gains of $96.5m, earnings came in at $110.6m, down 25% yoy. The drag was largely the result of significantly lower associate contribution from projects such as Nassim Park Residences and higher finance expenses, which was partially offset by higher revaluations and operating results from property development, leasing, hotel operations and dividend contributions. Revenue from property development activities surged 58% yoy thanks to ongoing contributions from projects such as Double Bay Residences, Terrene at Bukit Timah as well as Spottiswoode Residences. In addition, there were additional contributions from Parkroyal Serviced Suites in KL, which commenced operations in 4Q10 and Parkroyal Melbourne Airport, acquired in April this year.

Spore and China landbank provide development visibility. Looking ahead, the remaining Lion City Hotel/Hollywood Theatre development and Bedok Reservoir site would collectively offer an attributable c550 units. UOL remains cautious in terms of landbanking in Singapore. It has received provisional permission to develop a retail/SOHO for the former site and plans to market the Bedok Reservoir site later this year.

Recommendation

Maintain Buy. We continue to like UOL for its multi-engine growth prospects in the residential, commercial and hospitality sectors. Maintain Buy with a lower TP of $5.19 after adjusting for lower listed equities value, pegged at an adjusted 15% discount to RNAV.

Golden Agri-Resources Ltd - Robust 2Q11 showing; maintain BUY (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$0.62

Fair Value: S$0.80

Robust 2Q11 performance. Golden Agri-Resources (GAR) put out another strong set of results, as 2Q11 revenue surged 120.4% YoY (+9.4% QoQ) to US$1600.5m, or 10% above our forecast; But gross margin was mixed, coming in at around 31.4% in 2Q11, while up 8.2 percentage points (ppt) from 2Q10, it fell 4.5 ppt QoQ. Reported net profit improved by some 172.3% YoY (but eased 22.0% QoQ) to US$179.9m. Estimated core net profit jumped 151.6% YoY (down 22.4% QoQ) to US$166.2m, or around 4% ahead of our estimate. For 1H11, revenue also surged 126.8% to US$3063.5m, meeting 75.5% of our original FY11 forecast, while reported net profit climbed 165.6% to US$410.6m; estimated core net profit came in around US$380.4m, meeting 62.5% of our FY11 estimate.

Seasonal recovery in CPO production. On the operations front, CPO production saw a decent 8% QoQ increase to 650k tons; palm product yield also improved further to 1.5 tons/ha from 1.4 tons in 1Q11 and 1.0 ton in 2Q10. For the quarter, GAR achieved ASP of US$1137/ton, though down slightly from US$1150 in 1Q11. Meanwhile, cash cost also crept up to US$291/ton in 2Q11 (versus US$260 in 1Q11) due to the appreciating IDR against the USD; GAR also used 40% more fertilizer in 2Q11 following a wet 1Q11. Barring any adverse weather conditions, GAR believes it should be able to achieve >10% increase in CPO production for 2011.

Growth strategy still intact. As before, GAR intends to invest some US$450m as capex this year, with the bulk going into its expansion in the high-margin upstream business; this as it targets to increase its planted area by 20-30k ha this year, mainly via its own plantings; but management does not rule out acquisitions (of complementary crops like rubber and sugar) if opportunities arise. It plans to expand its downstream production capabilities in cooking oil, margarine and other specialty fats to shift product mix into higher value-added products. It also aims to develop its destination business and extend the distribution reach of value-added CPO products in key countries.

Maintain BUY. Due to the higher-than-expected ASP achieved, we are raising our CPO price assumption from US$950/ton to US$980/ton; and to also account for the robust 2Q11 showing, we are raising our FY11F revenue forecast by 15.2%; earnings forecast by 10.7%. But due to current depressed market sentiment, we lower fair value from S$0.96 to S$0.80 (now based on 12.5x blended FY11F/FY12F PER versus 16x FY11F PER previously). Maintain BUY.

UOL Group Limited - Boost from revaluation gains (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$4.51

Fair Value: S$5.48

2Q11 broadly in line. UOL announced 2Q11 PATMI of S$202.2m, up 16% YoY over restated 2Q10 figures. Stripping out revaluation gains of S$96.5m, 2Q11 PATMI fell to S$105.7m which constitutes 20% of our FY11 estimates and is broadly in line with our expectations. 2Q11 revenue also increased 40% YoY to S$455.9m, mainly due to the implementation of INT FRS 115 earlier this year (without which, growth would be a more muted 25%), increased revenue recognition from development projects under construction and the added contributions from Parkroyal Serviced Suites Kuala Lumpur which was acquired in 4Q10 and Parkroyal Melbourne Airport hotel in Apr 11.

Bedok Reservoir development to launch in November. Management indicated that it would launch its Bedok Reservoir site in Nov 11. Despite global uncertainties and possible softening of the private residential market, we think UOL would achieve decent margins given a estimated breakeven of S$825 psf and recent transactions at around S$1,000 psf in the vicinity. If economic headwinds worsen, however, the pace of sales may be somewhat slower but we believe the likelihood of this is already priced into the stock at this juncture. The Lion City hotel project has received provisional permission to be redeveloped into a 60:40 commercial-residential (SOHO) units. Of the other projects under UOL's book, there are ~30 units left at Spottiswoode while the remaining projects are mostly sold out.

Hotel results pulled back by acquisition costs. 2Q11 revenues from UOL's hotel operations (Pan Pacific Hotels Group "PPHG") increased 13% YoY to S$88.1m, largely due to the added contribution of Parkroyal Melbourne Airport. The acquisition resulted in higher administrative expenses (up 32% YoY to S$11.6m) and also an added transaction cost of S$8.1m for stamp duty, legals fees, etc. Interest expenses in 2Q11 also increased to S$3.2m versus S$0.7m in the same period last year as PPHG's debt load increased 78% YoY to S$313.1m. As a result, 2Q11 net profit of the hotel segment fall 55% YoY to S$6.6m.

Uncertainty breeds opportunities. We continue to see UOL as a beneficiary of the uncertainty in the residential property space given its limited residential land-bank and as most of its launched projects are sold out. Potential positive catalysts ahead include accretive land-banking acquisitions, positive sales at the Bedok Reservoir and Lion City Hotel developments and further consolidation of its UIC stake. We update our RNAV and maintain BUY at a fair value estimate of S$5.48 (at 20% discount to RNAV) versus S$5.57 previously.

Wilmar International Ltd - Expect stronger 2H (CIMB)

OUTPERFORM Maintained

S$5.11 Target: S$6.25

Mkt.Cap: S$33,091m/US$27,112m

Palm Oil

• Above; maintain OUTPERFORM. 1H11 core net profit of US$811.7m accounts for 53% of our FY11 forecast and 49% of consensus. We consider the results to be above our expectation (on stronger-than-expected plantation and refining earnings due mainly to better selling prices) as we are expecting a stronger 2H11 from its sugar and consumer-products segments. As expected, the group announced an interim dividend of 3 Scts. We expect Wilmar to weather any potential economic downturn better than its peers due to its strong management and business model. We are keeping our EPS forecasts and target price of S$6.25 (16x P/E) for now, but may raise them after the results briefing. Potential catalysts are stronger results and possible M&As.

• Highlights. 2Q11 core net profit (excluding fair-value losses on embedded derivatives of convertible bonds and the reversal of derivatives’ marked-to-market losses) grew 4.6% yoy to US$403.9m, led by improved performances from its plantations and palm-oil mills as well as better margins achieved for its palm and laurics segments. However, consumer products’ margins were lower due to priceincrease restrictions in China while the sugar segment lost money as the milling business remained in the maintenance period and the crush season had not commenced. Earnings from oilseeds and grains were weaker due to poor crushing margins in China as a result of the country’s high imports of beans. Part of the better performance in 2Q11 stemmed from forex gains from a depreciating US$ against regional currencies, which led the group to book higher “other operating income” of US$224.8m against US$55m in the previous year.

• Wilmar remains positive on its prospects, despite a challenging operating environment in China and uncertainties in the global economy. It expects to benefit from the strong growth of Asian economies, the strength of its business and its investments in new and existing businesses.

Xinren Aluminum - Solid result with attractive valuation (DBSVickers)

BUY S$0.33 STI : 2,796.22

Price Target : 12-Month S$ 0.73

Reason for Report : 2Q11 Results

Potential Catalyst: Substantial hike in aluminum prices

SV vs Consensus: Sole house covering this counter.

• 2Q11 results were above our estimates thanks to aluminum price hike

• Constructing carbon anode plant will save costs

• Retain BUY call with TP at S$0.73

2Q11 results beat our projection. Xinren Aluminum (XAH SP) registered RMb1,885m revenue(+37% y-o-y), RM256m gross profit(+116% y-o-y) and RMB141m net profit(+454% y-o-y) - exceeding our expectations. We believe this was due to the hike in primary aluminum prices, which enabled the company to gain from holding raw material and product inventories. Gross margin improved to 13.6% in 2Q11 from 10.3% in 1Q11 thanks to ASP hikes, particularly as increase in export sales outpaced the increase in average production cost. Its inventories and receivables increased by 10%, 6% respectively compared to FY10 following the revenue increase. Its net debt also increased by 9% due to capex and working capital.

Less volatile aluminum prices, desirable investment in carbon anodes LME primary aluminum prices rose to US$2,600/ton, up 24% y-o-y and 4% q-o-q, while aluminum prices on the SHFE (Shanghai future exchange market) nudged up 9% y-o-y and 0.4% q-o q in 2Q11. Aluminum prices in China are less volatile thanks to supply surplus, which should result in more stable earnings compared to producers of other metals. The company has decided to construct a production plant for carbon anodes. Capex is estimated at RMB 300m in FY11. When the plant construction is completed, this would lead to cost savings of RMB 400/ton or 2.5% for primary aluminum.

Retain BUY call with S$0.73 TP pegged at 9.7x FY11F PE or 15% discount to the weighted average valuation of its global peers. Factoring in the stronger results, we have revised up FY11F EPS by 2%. However, FY12F EPS revised down by 3.4% following the delay of the fabrication plant in Jiangyin to 3Q12 (from 3Q11) due to late delivery of equipment. The stock is trading at an undemanding 4.4x FY11F PE and 1.1x FY11F P/BV. LME Aluminum prices have dropped by 8% since 1st Aug, while Xinren’s share price has fallen by 13%. We believe consistent earnings delivery should be a catalyst for the stock and remove investors’ skepticism on the counter.

YHI International - On track for OEM contract wins in FY12F (DBSVickers)

BUY S$0.30

Price Target : S$ 0.54

At a Glance

• 2Q11 results in line with our estimates

• China OEM program on track for FY12F production

• Divestment of Yokohama China will improve its position to promote its own brands

• Maintain Buy and S$0.54 TP

Comment on Results

Results within expectations. 2Q11 results were in line with our estimates. Revenue grew 11% y-o-y to S$134m from S$121m while earnings rose 13% from S$5.9m to S$6.7m. The results were driven by the manufacturing segment, which increased 14%. EU’s implementation of 22.3% anti dumping duties on alloy wheel imports from China last year resulted in increased production from Malaysia’s Sepang plant for European customers. Gross margin (+0.4ppt) and net margin (+0.1 ppt) improved as a result of better productivity, hedging strategies and cost control.

Divestment in Yokohama China entities will allow increased activities in China. During the quarter, YHI divested its entire 49% stake in Yokohama Tire Sales (Shanghai) Co. Ltd and 10% stake in Hang Zhou Yokohama Tire Co Ltd. YHI is expected to book an investment gain of S$7.9m from the sale in 2H11. Accordingly, contribution to associate income will cease in 2H11. We believe the divestment will improve YHI’s position to promote its own brands and other third party products in China.

FY12F OEM developments on track. YHI’s China OEM program is also on track for production in FY12F. Targeted total capacity of 1m units is scheduled for trial production in 4Q11. We expect manufacturing revenue to grow 25% in FY12F.

Recommendation

Maintain Buy, S$0.54 TP. No change to earnings estimates. Maintain BUY and S$0.54 TP based on 8x blended FY11/FY12F core earnings.

Viking Offshore and Marine - 1H11 net profit of S$5.1m (OCBC)

Dropping Coverage

Current Price: S$0.107

1H net profit increased 7% YoY to $5.1m. Viking Offshore & Marine's (VOM) 1H11 revenue increased by 37% YoY to S$48.6m, while net profit increased by 7% to S$5.1m. The increase in revenue was mainly due to the consolidation of newly acquired subsidiaries. During 1H11, the group took a S$7.7m impairment charge against Marine Accomm Pte Ltd (MAPL); but this was offset by a S$8.0m gain from the disposal of its quoted investments and a S$3.2m bargain purchase from the acquisition of Viking Facilities Management Pte Ltd. Excluding the above mentioned and other non-operating items, VOM's adjusted NPBT for 1H11 would be S$5.8m, a 61% increase YoY. Compared to a year ago, the group's overall order book increased 19% to S$41.7m.

Impairment charge of S$7.7m. The impairment charge comprised VOM's investment in and loan to MAPL. Recall that VOM acquired a 55% stake in MAPL in August 2010, but sold back a 35% stake four months later. By July 2011, MAPL was placed under receivership. VOM has also lodged a report with the Commercial Affairs Department on MAPL's financial record-keeping. Besides the impairment charge, VOM may have to deal with a counter claim from MAPL's former director Tong Guan Teck, alleging that he is entitled to an indemnity from VOM brought against him by MAPL's creditor bank, DBS. As the case is now with the local authority, VOM is unable to provide further details.

Gain of S$8m from sale of quoted investments. The sale of quoted investments pertains mainly to VOM's shares in United Envirotech (UEL). As explained in our report dated 1 Jul 2011, its UEL shares were impaired when the market price fell to $0.12 on 31 Dec 2008. As such, when VOM sold 32m of UEL shares (as per its announcement on 29 Jun 2011), the average selling price of $0.30 produced an accounting gain of S$0.18 per share. For 1H11, sale proceeds from its quoted investments (which we estimate to be S$13-15m) were channeled towards the repayment of short-term borrowings.

Heightened market risk. Given recent equity market volatility and uncertainty, VOM's remaining quoted investments, worth around S$8m, may be subject to market risks or depressed prices. Meanwhile, management is currently in the process of integrating its recently acquired companies. At current price, its market capitalization is relatively small at only S$64m. Due to a reallocation of resources, we are DROPPING COVERAGE.

ADAMPAK (Lim&Tan)

S$0.245-ADAM.SI

􀁺 While the company’s 2Q 2011 profit was again negatively impacted by the weakness of the US$ and higher costs, the 16% yoy decline to US$1.96mln nevertheless represents a narrowing from 1Q 2011’s 35% yoy decline. Sequentially, net profit rose 33% while sales rose 7% to US$15.5mln.

􀁺 Despite 1H 2011’s profit being down 25% yoy to US$3.43mln, management kept their promise by maintaining interim dividend at 1 cents a share, raising their payout ratio from 40+% to 60+%. This is still within the company’s target payout ratio of between 40-80% range and is also made possible by their consistently strong free cash flows.

􀁺 This has been again demonstrated in 1H 2011 where the company generated US$5.6mln in operating cash flows, more than sufficient to cover capex of US$248,000 and dividend payment of US$4.3mln, adding another US$185,000 to their cash holdings of US$13mln. Last year was also similar where they generated strong operating cash flows of US$5.4mln, more than sufficient to cover capex of US$1.64mln and dividends of US$2.8mln.

􀁺 If the company can maintain last year’s final dividend of 2 cents a share early next year, its dividend yield would be an attractive 12.2% at its current share price of 24.5 cents.

􀁺 Due to the uncertainties brought about by the recent weakness in US and European markets, management said that they will continue to improve productivity and operational efficiencies to improve their bottom-line performance.

􀁺 With the stock price having retraced 21% since our last update in May 2011 and with its yield and valuations starting to look attractive again, we are upgrading to BUY.

CSE Global - Below expectations but worst could be behind (DBSVickers)

HOLD S$1.08 STI : 2,796.22

Price Target : 12-month S$ 1.20 (Prev S$ 1.35)

Reason for Report : Earnings Revision

Potential Catalyst: New order wins in 3Q11F

DBSV vs Consensus: 4% below FY11/12F consensus

• Excluding one-off provision of S$21.7m, core profit of S$11m fell short of our S$15m estimate.

• New order wins of S$110m was below our S$125m estimate although 3Q11F could be a record quarter in terms of new order wins.

• FY11F/12F core earnings lowered by 8%/4%.

HOLD at lower TP of S$1.20. New order wins in 3Q11F would be the key catalyst for the stock. Provisions made for cost overruns in Middle East. CSE reported headline loss of S$7m due to S$21.7m provision for project cost overruns in the Middle East – for two projects in Saudi Arabia and two projects in the UAE. Excluding after tax impact of the provisions, core profit of S$11m (-17% QoQ, -27% YoY) fell short of our estimate due to lower revenue from Middle East. The Managing Director for the telecom business unit has resigned and Mr. Tan Mok Koon, Executive Deputy Chairman, has taken over, as the Interim Managing Director for the business unit while a new Managing Director will start on 26 September. Management is confident that excluding the provision, FY11F profit can grow.

FY11F order wins lowered slightly to S$500 from S$520 earlier. 2Q11 new order wins of S$110m (+5% QoQ, -5% YoY) fell short of our estimate of S$125m due to Middle East woes. However, CSE could see order wins of up to S$200m in 3Q11F and has already announced order wins worth S$83m from Middle East on 8 Aug. Australia for LNG, North America for upstream and Middle East (Qatar, Oman and Iran) for downstream projects should be the key drivers.

FY11F/12F core earnings trimmed 8%/4 on lower order win assumptions. Our lower TP is based on 10x-blended FY11F-12F EPS (25% discount to historical average of 12.5x). PER re-rating is possible with more order win announcements in 3Q11F.

C & O PHARMACEUTICAL - Not particularly exciting (DMG)

REJECT OFFER

Price S$0.475

Offer S$0.50

Target S$0.55

Offer price is moderately attractive. We have always maintained our view that C&O’s extensive distribution network makes it an attractive M&A partner for a pharmaceutical company looking to penetrate the China market. Shionogi, a Japanese pharmaceutical manufacturer, will purchase a 24.17% stake in C&O from Leo Star and Mr Gao Bin, at S$0.50/share. At completion, Shionogi (together with Sumitomo, C&O’s substantial shareholder) will hold 53.17% of C&O, triggering a GO for the rest of the shares it does not own. The GO will be at S$0.50/share. This translates into a P/E of 12x our FY12F earnings, a 10% upside from the stock’s price before it was halted. The offer price is also at a premium of 4.0% to 22.8% over the 1-month, 3-month, 6-month and 12-month VWAP of the shares. This is not particularly exciting, considering that Sihuan (a pharmaceutical company with operations in China) was de-listed in 2009 at a much higher premium over the VWAP of its shares.

Outlook is more stable in FY12. We had lowered our TP to S$0.45 in our 16 May report, on the back of weaker than expected quarterly earnings and possibly flat YoY FY11 earnings, due to the uncertain operating environment then. Going forward, C&O is seeing a pick-up in restocking activities by customers and we expect earnings growth to be stable in FY12. Contribution from its new products is also likely from 2HFY12. On top of that, management aims to double revenue from its C&O-branded products over the next four years (currently ~32% of Group revenue) as it continues to develop new products.

C&O is worth more. While C&O is much smaller than regional peers in terms of revenue generated and market capitalisation, its margins are more than double that of its peers. Based on relative valuation, the target P/E for C&O would be 13.4x (a discount to current peer average of 35x). Applying that to our FY12F earnings, we have a fair value of S$0.55. We urge shareholders not to accept the offer at S$0.50/share

Golden Agri‐Resources (KimEng)

Background: Golden Agri‐Resources (GAR) is the largest Indonesian palm oil plantation company, with over 446,000ha of planted area and growing annually by around 8,000ha. It also has downstream operations in Indonesia and China. Most of its sales are derived ex‐plantations, with 48% of revenue coming from CPO sales, making it the purest CPO play.

Recent development: GAR continues to report good earnings, with 2Q11 earnings at US$180m, up 172% versus 2Q10. The counter continues to be heavily traded on the SGX, and was down 16% in the recent market sell‐off. With consensus forward PER of 10.2x, GAR looks attractive at the current levels.

Key ratios…

Price‐to‐earnings: 10.2x

Price‐to‐NTA: 1.2x

Dividend per share / yield: $0.0077 / 1.2%

Net cash/(debt) per share: US$0.066

Net debt as % of market cap: 12%

Share price S$0.62

Issued shares (m) 12,138.7

Market cap (S$m) 7,526.0

Free float (%) 51

Recent fundraising Nil

Financial YE 31 Dec

Major shareholders Widjaja family ‐ 49%

YTD change ‐22.5%

52‐wk price range S$0.535‐0.83

Our view

Earnings driven by volume. While its 2Q earnings were down sequentially by 22%, this is a result of lower average CPO market prices for the quarter, which fell by some 10%. However, volumes continued to pick up, with 650,000 tonnes of production versus 602,000 tonnes in 1Q11.

Yields on the mend. FFB yield has improved, with GAR now averaging 5.3% per quarter. The improvement in weather conditions has played a part, allowing better use of fertiliser. CPO extraction rate remains healthy at 23%, attesting to the quality of GAR’s crop.

Short‐term concerns aside, fundamentals still in place. GAR will benefit from CPO production volumes on the back of a higher planted area, and a favourable age profile for its planted area. While CPO prices continue to trend downwards for the moment, we expect them to stay firm in the longer term. A sharp collapse in CPO price in the current environment is unlikely, but the risk of a credit tightening may suck liquidity out of the commodities markets and in turn, depress prices.

Super Group (KimEng)

Event

Super’s 2Q11 profits fell by 37% YoY but only because 2Q10 results included a $10m gain on the sale of a property joint venture whereas there was a $0.7m loss in 2Q11 from the sale of an associate company. Core profits actually rose by 44% to $12.6m with healthy underlying trends in sales of branded consumer products and ingredients. While margins were soft in 1H11, Super is headed into the seasonally stronger 2H with two rounds of price hikes (February and June), an upcoming 67% increase in ingredient production capacity and raw material costs that are starting to come off. Maintain BUY and target price of $1.78.

Our View

Super recorded healthy sales trends in 2Q11 as key markets Thailand, Singapore and Malaysia drove the third consecutive quarter of accelerating growth (+22% YoY) for branded consumer products (78% 3‐in‐1 coffee). In turn, ingredient sales jumped 285% YoY on healthy utilisation of its 75,000mt capacity, driven by new market Indonesia.

Margins fell from 39.3% in 1H10 to 33.5% in 1H11 as the prices of raw materials (robusta coffee, palm oil and sugar) surged YoY. However, with two rounds of price increases in February and June 2011 already implemented, along with sliding prices of coffee and palm oil since they peaked in June, we expect margins to be stronger in 2H11.

Responding to strong demand by existing China customers as well as new customers in Southeast Asia (eg, Indonesia), Super intends to increase its non‐dairy creamer capacity by 50,000mt in 3Q11, double its original plan of 25,000mt. In addition, the second half of the year is traditionally stronger, hence there is room for earnings upside.

Action & Recommendation

We stand by our BUY recommendation on Super. The share price has been made more attractive by the recent market weakness. Our forecasts and target price of $1.78 are unchanged.

Yangzijiang Shipbuilding - Steady hand at the helm (KimEng)

Event

 Yangzijiang Shipbuilding (YZJ) posted a 20.4% YoY increase in 2Q11 net earnings to RMB963.9m, broadly in line with its profit guidance. The increase, however, was boosted by forex gain and interest fees from held‐to‐maturity investments (accounting for 27% of 1H11 pre‐tax profit). We continue to maintain that YZJ’s non‐core investments have helped the group to diversify its income stream, thus providing a buffer for its more cyclical shipbuilding business. Reiterate BUY.

Our View

 Second‐quarter revenue grew by 2.9% YoY to RMB3,161.9m, mainly due to an increased contribution of RMB229.9m from Changbo yard. To date, the group has delivered 29 vessels altogether, with 17 in 1Q11. This means it is on track to meet its vessel delivery target of 65 for the full year (versus 50 in FY10).

 Gross margin narrowed by 2.7ppt YoY and 5.0ppt QoQ to 22.1% in 2Q11 (GPM of 24.6% in 1H11 vs 24.1% a year ago) as fewer higher‐priced vessels secured prior to the financial crisis were delivered. However, with about 50% of its US$5.5b order backlog still consisting of these highly‐profitable contracts, we reckon YZJ will be able to maintain its margins at above‐industry average at least until FY12.

 So far, five out of the seven units of 10,000 TEU containerships with Seaspan have been made effective, with options for another 18 identical vessels likely to be exercised in the next 12 months. While order flow will inevitably slow down amid the global economic uncertainty, YZJ remains optimistic that it can capture a bigger market share as it moves up the value chain to produce larger ships.

Action & Recommendation

Management has taken steps to streamline operations and improve productivity to counter escalating costs. The stock currently trades at less than 7x PER, supported by a dividend yield of about 4%. YZJ Chairman Ren Yuanlin has bought back 500,000 shares each on two occasions, at $1.27 and $1.10 per share, respectively. We maintain our BUY call and SOTP‐based target price of $1.65.

Singapore Telecoms - Soft 1Q12 underlying earnings; but still defensive (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$2.95

Fair Value: S$3.64

1Q12 results slightly short. SingTel reported its 1Q12 results this morning, with revenue rising 7.4% YoY (but down 0.8% QoQ) to S$4605.2m, or around 0.7% ahead of our forecast, with both Singapore and Australian businesses recording healthy revenue growth. While operating EBITDA also grew by 2.3% YoY, it fell 7.7% QoQ to S$1284.1m; this as Optus recorded seasonally lower EBITDA across all business segments (including impact of a writeback of outpayment provision in 4Q11). Also lower was the overall operating EBITDA margin, which slipped from 29.3% in 1Q11 to 27.9% in 1Q12; this was mainly due to the 4.7 percentage point (ppt) fall in Optus' margin, but mitigated by the 3.2 ppt recovery in Singapore. Reported net profit slipped 2.9% YoY and 7.6% QoQ to S$916.2m, but underlying earnings saw a bigger 7.4% YoY and 12.5% QoQ slump to S$873.0m, falling 11.8% short of our estimate; this mainly due to an exceptional item of S$61m.

Softer associates showing due to forex. Associates pretax profits fell 9.2% YoY and 2.7% QoQ to S$500m; negatively impacted by foreign exchange movements. SingTel noted that major regional currencies depreciated between 4.7% and 18.9% YoY or down some 1.7-6.5% QoQ (with the exception of IDR which rose 0.7%). Even in constant FX term, SingTel revealed that associate pre-tax earnings eased by 3.1% YoY; the drag coming mainly from Bharti, which fell 20% YoY in local currency terms, as earnings were impacted by higher interest costs, depreciation and reduction of tax holiday benefits.

Maintains FY12 guidance. Nevertheless, SingTel has retained its guidance for FY12. For Singapore, it expects operating revenue to growth at low single-digit level, driven by higher mobile and mio TV revenue; it also expects operating EBITDA to be stable (achieved 35.2% margin in FY11); capex to be ~S$900m (upgrade mobile data network etc) and free cashflow to come in ~S$1.3b. For Australia, it expects operating revenue and EBITDA to grow at low single-digit levels; it also expects to generate free cashflow of A$1b after spending A$1.2b on capex. On the associates front, SingTel expects ordinary dividends to remain stable (came in ~S$2,141m in FY11).

Maintain BUY. Given that 1Q12 underlying earnings met only 21.6% of our full-year forecast, we reduce our FY12 estimate by 3.6% (FY13 by 3.5%) to incorporate softer margin assumptions for Optus and also lower associate contributions. But because of the higher market value of its associates, our fair value remains unchanged at S$3.64. We also continue to like SingTel for its defensive earnings. Maintain BUY.

TIGER AIRWAYS (DMG)

SELL

Price S$1.04

Previous S$0.62

Target S$0.62

Australian ban lifted; Losses to mount in FY12

Tiger Australia to re-commence from Aug 12. Tiger Airways Australia (TAA) will recommence

operations from 12 Aug, following the lifting of suspension of its Air Operator’s

Certificate (AOC). However CASA has imposed certain conditions on the LCC including an

initial limitation of 18 sectors per day for the month of Aug 2011. As expected, TAA announced it will scale down its network and operations in Australia with the redeployment of two A320s and closure of its Adelaide base. All staff are being offered redeployment to its Melbourne Tullamarine base, and hence, we suspect it could shut down Avalon as well. First route to recommence would be Melbourne-Sydney. We expect a gestation period for demand to pick up following recent negative publicity with Tiger aggressively slashing fares to attract passengers. To add to the challenging operating landscape in Australia, the Government has proposed to charge a carbon price of A$23 per tonne to domestic airlines via an increase in aviation fuel excise to which TAA estimates will be ~A$3 per passenger. The LCC is, however, confident on passing this cost down to the passenger.

July 2011: Pax down 32% YoY. Tiger reported a 32% YoY fall in passengers carried to 358k

for the month of July 2011 with load factor declining 3ppt to 86%. This is due to the grounding of its Australian fleet for the month.

Revising fleet assumptions and expecting lower yields. We have revised our fleet assumptions from 33/39 to 35/43 for FY12/13 as management conceded they might lease their A320s to external parties but will not delay any deliveries. Consequently our ASKs and RPKs are increased by 5.7%/10.8% for FY12/13 respectively. We maintain our load factor assumption of 81% but lower our yields by 9.9%/0.6% for FY12/13 as we expect Tiger to discount fares aggressively to attract traffic.

Expect to FY12 to end at a loss. 1QFY12 registered a net loss of S$20.6m, which resulted

from higher fuel costs and a two week disruption to its Australian operations as a result of the Chilean volcanic ash cloud. While fuel prices have eased, we expect the five week grounding of Tiger Australia and consequently weak demand and aggressive discounting of fares to lead to deeper losses in 2QFY12. There will also be one-off costs from legal and consulting fees following the court proceedings in Australia. We are also concerned on the Group's net gearing levels which hit 2.76x in 1QFY12 and will hit 4x by end FY12, leading to a potential cash call.

Maintain SELL with lower TP of S$0.62. Tiger is currently trading at 3.3/2.7 FY12/13 P/B vs

its peers at 2x. Based on our revised earnings, we lower our TP to S$0.62 (previously S$0.74), pegged at an unchanged 2x FY12F P/B.

SOUND GLOBAL - A sound 2Q (DMG)

BUY

Price S$0.625

Previous S$1.08

Target S$0.90

Sound Global (SG) announced a strong set of 1H11 results that made up 39.9% of our FY11 estimates - still within our expectations since 2H is typically stronger than 1H (1H09 – 33.7%, 1H10 – 41.5%). 2Q11 earnings came in at RMB109.6m (+47.2% YoY), on the back of a 63.1% YoY surge in revenue with contribution from the Saudi Arabia project, higher contribution from its Operation and Maintenance (O&M) segment as well as higher contribution from its turnkey Engineering, Procurement and Construction (EPC) services. With the continued strong demand for wastewater treatment in China, coupled with SG’s strong track record of project wins and robust order book of RMB2.4b, we maintain our BUY recommendation and our earnings estimates. Our new TP of S$0.90 (S$1.08 previously) is pegged to 14.9x FY11 earnings (17.8x previously) – the level SG’s China peers are trading at. Valuations remain attractive with SG trading at a prospective P/E of 10.3x – at least a 30% discount to its China peers.

2Q11 earnings within expectations. SG’s earnings came in at RMB109.6m for the quarter, up 47.2% YoY, on the back of a 63.1% YoY surge in revenue. 2Q11 revenue hit RMB670.2m, boosted by contribution from the Saudi Arabia project, as well as higher contributions from the turnkey EPC services and O&M segments.

Large order book and strong pipeline of projects. SG’s order book remains strong at ~RMB2.4b, of which RMB1.8b is from China, giving earnings visibility and margin sustainability. We understand that the company is currently in talks to invest in a number of BOT projects. With SG’s strong track record in both China and the international markets (it won a US$50m EPC project in Bangladesh in May 11), we believe SG would be able to continue securing more projects moving ahead.

Positive macro outlook. Outlook for the sector remains positive, with growth likely to continue in the form of 1) building new water treatment plants, 2)upgrading of existing water treatment plants and 3) outsourcing of O&M of treatment plants to third parties like SG.

Pacific Andes Resources Development - Moderated FY12 expectations (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$0.21

Fair Value: S$0.344

Posted 3Q net earnings of HK$255m. Pacific Andes Resources Development (PARD) posted 3QFY11 net earnings of HK$254.8m, up 17% YoY but down 5.9% QoQ. 3Q net earnings amounted to 32.4% of consensus full year's estimate of HK$786m (based on Bloomberg poll). Revenue grew 32.5% YoY and 20.9% QoQ to HK$2965.4m. Revenue growth came from both core divisions; Frozen Fish SCM unit (up 49% YoY) and Fishing division (+19%). It attributed the better performance to higher sales in China (which accounted for 73% of group revenue now) as well as better contribution from its Peruvian fishmeal operation. Although gross profit rose 19% YoY to HK$698m, gross profit margin fell from 26.2% to 23.5% due to higher fuel costs and repair and maintenance costs for its vessels.

Focus on operational efficiency. PARD aims to focus its capex on improving operational efficiency. For its fishing operation, it is planning to better deploy its vessels to ensure higher utilisation rate. In the South Pacific, it is enjoying average selling prices (ASP) of about US$1300 per ton, which is similar to the North Pacific prices for Alaskan pollocks. There appears to be an emphasis on the South Pacific, largely to develop the grounds for future quota allocations. For its Frozen Fish SCM business, it has also outlined its plan to reduce its reliance on third party chartered vessels to lower its transportation costs.

Higher debts - is it a concern? Total borrowings moved up from HK$5.9b in Sep 2010 to HK$8.6b by Jun 2011. This led to an increase in debt-to-equity ratio from 61% to 74%. The bulk is in short-term debts (55% of total borrowings), and CFG (China Fishery Group) accounted for 45% of total debts. Looking at the breakdown, the bulk of the debts under PARD is for short-term working capital usage and as such we are not overly concerned at this juncture.

Cut fair value estimate to 34.4 cents. In view of global uncertainties, we have moderated our forecasts taking into account muted outlook for demand as well as ASPs, which have trended down since earlier this year. Overall, we have cut our FY12 earnings by about 10% to HK$855.1m. As a result of this, our fair value estimate, which is based on blended earnings, was also affected, down from 38.5 cents to 34.4 cents. However, with the recent selling, its share price has taken a hit and at current level and with the potential upside, we are maintaining our BUY rating.

SingTel - Flip Flop from Optus (DBSVickers)

HOLD S$2.95

Price Target : S$ 3.20

At a Glance

• 1Q12 underlying profit of S$873m (-7% YoY, -13% QoQ) was 5% below ours and 8% below consensus

• Optus was the key disappointment especially after posting impressive earnings in 4Q11

• Management maintained its EBITDA guidance for Singapore & Australia. HOLD for 6% yield at 12x FY12F PE (historic average 13.4x)

Flip flop from Optus. Optus’ net profit of A$174m (+2.5% YoY, -33% QoQ) was significantly below expectations. 1Q12 EBITDA of A$560m saw a sharp decline of 17% QoQ from a seasonally strong 4Q11 as EBITDA margins declined to 24.2% from 28.9% in 4Q11, even lower than 24.5% in 1Q11. Optus continues to face pricing pressure from competitors in the mobile segment. This was also reflected in blended ARPU decline of 2.8% QoQ to A$45. This may imply risk to Optus’ FY12F guidance of low-single digit growth in EBITDA, in the light of exceptionally high EBITDA base in 4Q11. A potentially lower mobile termination rate is also a risk for Optus.

Singapore performance was inline. Singapore’s net profit of S$328m (-12% YoY, +8% QoQ) was largely inline keeping in mind that higher content cost was absent in 1Q11. With 1Q12 EBITDA of S$567m (-4% YoY, +3% QoQ) there is little risk to stable EBITDA guidance.

Associate contribution hit by weak Bharti and strong SGD. Associate net profit contribution of S$362m (-12% YoY, -4% QoQ) continued to decline as Bharti’s earnings contribution of S$103m declined by 37% YoY and 20% QoQ. Strong Singapore dollar versus Indian Rupee, Indon Rupiah, Thai Baht and Philippine Peso further dragged earnings. With 3% earning growth in FY12F, investors might appreciate regular yield exceeding 6%. Our FY12F earnings are 2% below consensus already. SingTel may not outperform unless earnings payout ratio is raised above 80% or capital management is performed more frequently in our view.

Synear Food Holdings (KimEng)

Background: Synear Food Holdings produces quick-freeze products, such as savoury and sweet dumplings, desserts and snacks, which are sold in more than 20 provinces in China. It owns two production facilities in Chengdu and Huzhou. The stock traded at a peak of $2.35 per share in 2008 but has never regained such levels or volumes since.

Recent development: Although sales rose by 4.1% YoY in 2Q11 thanks to the Dragon Boat Festival, Synear reported a 40.6% drop in net profit to RMB54.2m. The decline was caused by higher inflation rate affecting raw material and labour costs. Net profit margins dipped slightly from 27.5% to 25.9%.

Key ratios…

Price-to-earnings: 8.4x

Price-to-NTA: 0.3x

Dividend per share / yield: S$0.0017 / 1.3%

Net cash/(debt) per share: RMB0.60

Net cash as % of market cap: 82.4%

Share price S$0.137

Issued shares (m) 1375

Market cap (S$m) 188.4

Free float (%) 54.0%

Recent fundraising activities Apr 2007 – Placement shares 125m at S$1.85

Financial YE Dec 31

Major shareholders CEO Wei Li (33.3%), Peng Wang (12.7%)

YTD change -41.7%

52-wk price range S$0.115-0.285

Our view

Longer credit terms. During the global financial crisis, Synear extended its credit terms to major distributors from 30-90 days to 60-90 days. It granted another extension again in 4Q10 to 90-110 days. Most of these distributors, who distribute to supermarket chains like Carrerfour, Wal-Mart Supercenter and Metro Cash & Delivery, are said to have more than 10 years of business ties with Synear. Trade receivables have racked up from 132.5 days to 145.1 days (+9.5% YoY).

Marketing efforts noticed. Part of Synear’s efforts to improve brand visibility is the appointment of popular Chinese actor Tong Dawei as its spokesperson. It hopes thus to capture more market segments in China

S-chip turnaround. Although Chinese companies listed here have had their reputation shaken due to reports of financial discrepancies, there is a new trend toward privatisation of S-chips which have strong brand visibility in China as well as a vast distribution network. Nestle-Hsu FuChi is a case in point.

Inexpensive valuations. Synear has said that it will postpone the commencement of operations at its new plant until market conditions become more favourable. The stock currently trades at historical PER of 8.4x and P/B of 0.3x, which are relatively undemanding.

Sarin Technologies Ltd (KimEng)

Event

Sarin reported a record quarterly net profit of US$5.0m (+8% YoY, +51% QoQ) on revenue of US$15.6m (+9% YoY, +27% QoQ). The results were slightly ahead of our forecasts with 1H11 revenue and net profit making up, respectively, 49% and 53% of our FY11 forecasts. An interim dividend of US 1.25 cents per share was also declared, higher than the fixed dividend policy of US 1.0 cent per share every half-yearly that it committed to earlier. Maintain BUY with a lower target price of S$1.34 due to the weaker US$.

Our View

Improved market conditions in 1H11 drove broad-based demand for Sarin’s products, along with accelerating sales of GalaxyTM related and QuazerTM II related products. Ten GalaxyTM systems were delivered in 2Q11 and six in 1Q11. The total number of installed Galaxy machines stood at 37 as at 1H11. This is on track to meet Sarin’s target to more than double the installed base of 21 Galaxy machine as at end-FY10. GalaxyTM related revenue for 1H11 has reached 25% of its total revenue, of which half of this was recurring in nature.

It is too early to assess how the current economic turmoil could affect the diamond industry. Management said there are no adverse indications yet. Diamond jewellery markets in China and India are expected to grow at 20% this year, following last year’s growth of 25% and 31%, respectively. The demand in the US was also unexpectedly strong prior to the current market fallout. In the absence of any negative industry signals, we are keeping most of our forecasts intact for now.

Towards end-3Q11, Sarin plans to launch a Light Performance Technology (LPT) product, the Sarin D-LightTM, targeted at manufacturers, gem labs and retailers. We expect contribution to the topline from 4Q11 although the amount may not be significant yet. Over the longer term, we believe the market potential for LPT could reach as much as US$50m a year.

Action & Recommendation

We raise our FY11F net profit by 6% following the record quarter but maintain our FY12-13 forecasts. Our target price is still based on 16x FY12F PER but is lowered to S$1.34, from S$1.38, after accounting for the translation loss due to the US$ depreciating against the S$. Maintain BUY.

Tiger Airways Holdings - Australian operations re-instated (DBSVickers)

FULLY VALUED S$1.04 STI : 2,821.09

Price Target : 12-Month S$ 0.83

Tiger Australia will be back in the air shortly. The Civil Aviation Safety Authority of Australia (CASA) has lifted the suspension of Tiger Airways Australia effective 10th August 2011, following 5 weeks of investigations and talks with the airline. While the Air Operator's Certificate has been re-instated, it comes with a new set of conditions that Tiger Australia must adhere to. According to CASA website, these conditions address key areas of operational importance within Tiger Airways and will underpin ongoing improvements in the airline's safety performance. To continue to operate, Tiger Australia must comply with the conditions while they are in place.

Operations will be rationalised, as expected. As part of the conditions, Tiger Australia can only fly a maximum of 18 sectors per day initially during August 2011. Any increase thereafter will be subject to the regulator's approval. This is down from more than 30 sectors that Tiger used to fly previously. Following the lifting of the ban, Tiger announced resumption of ticket sales and gradual ramp up of services from August 12th. As we had highlighted earlier, the airline will be rationalising its fleet and the routes it operates on, initially focusing on only the most profitable routes like Melbourne-Sydney. Tiger Australia will consolidate its 3 existing bases into one base at Melbourne (Tullamarine) and operate with 8 aircraft, down from 10 aircraft previously. The additional 2 aircraft will be redeployed elsewhere in the Group's operations in Asia.

Weak operating numbers for July 2011. These developments are pretty much in line with our expectations and do not affect our FY12 estimates materially. Tiger reported very weak passenger numbers for July 2011 - as expected, with grounding of the Australian operations - with passenger numbers down 32% y-o-y and 35% m-o-m to 358,000. After the losses recorded in 1Q12, we expect another round of heavy losses in 2Q12. Without the benefit of forward bookings, Tiger's ramp up in Australia would be gradual and profitability would be difficult in the near term because of the weak initial loads and likely promotional fares. A lack of visibility in fleet deployment ex-Singapore and global economic uncertainties further cloud the horizon. Maintain Fully Valued with TP of S$0.83.

Yongnam Holdings Ltd - Trading cheap despite good results (DBSVickers)

BUY S$0.24

Price Target : S$ 0.36 (Prev S$ 0.38)

At a Glance

• 2Q11 net profit of S$15.1m in line with estimates

• 4 new contracts worth S$193m have been secured in 2Q11; underpin earnings growth in FY11/12

• Expect catalysts from Downtown Line 3 contracts

• Maintain BUY with slightly lowered TP of S$0.36

Comment on Results

Margins continue to hold up. Yongnam delivered another record quarter, as net profit grew 13% to S$15.1m in 2Q11. 1H11 earnings now make up close to 51% of our full-year forecast. 2Q11 revenue was down marginally by 2% to S$82.5m though, as contributions from the Structural Steel (SS) segment declined, with the completion of many key projects last year. With higher contribution from high-margin Specialized Civil Engineering (SCE) business, gross margin remained robust at 29.6% up from 29.0% in 2Q10. The Group will continue to keep staff costs in check through higher productivity. Yongnam is also a beneficiary of a weaker US$ as some of its material costs like steel are denominated in US$ whereas revenues are mainly in S$.

Recommendation

Orderbook improves to S$509m. About 63% of the orderbook comprises SCE projects, and SCE segment’s contribution to revenues will likely overtake SS segment by 2H11. 31% of this orderbook will be recognised in 2H11, and management expects to sustain the strong performance in 2H11, underpinned by existing orderbook and healthy margins. We keep our numbers unchanged and expect 11% EPS CAGR over FY10-12. The stock is now trading at less than 5x PE, and appears significantly undervalued. We remain bullish on the Company's prospects, and maintain our BUY call. Our TP is adjusted to S$0.36 (7x blended FY11/12 PE). More contract wins, especially from the Downtown Line 3 projects in the next 6-12 months, should provide further catalysts to the share price. The Group is also pursuing overseas projects in HK (MTR, HKZhuhai- Macau bridge), India and Malaysia in the near term.

MIDAS (Lim&Tan)

S$0.41-MIDS.SI

􀁺 Midas won 2 contracts from repeat customer CSR Zhuzhou Electric Locomotive Co.

􀁺 The first is for the supply of 120 train cars for the Kunming Metro Project and is worth Rmb33mln. Delivery is expected to be from 2H2011-2013.

􀁺 The second is for the supply of 192 train cars for Guangzhou Metro Lines 1,2,8 and is worth Rmb62mln. Delivery is expected to be from 2H2011-2012.

􀁺 The new contract wins bring the year to date total contract wins to Rmb323mln, still 32% short of last year’s total of Rmb473mln, which itself was 56% short of the previous year’s total of Rmb1.083bln.

􀁺 While there is still 4+ months more for Midas to try to catch up on more orders, unfortunately, the Railway Ministry has just announced that they will be suspending approvals on new railway projects and will conduct safety checks on all high speed railways that are in operation or under construction. They will also re-evaluate the safety systems on rail projects that have received government approval but have not started construction.

􀁺 Yesterday, China CNR Corp (existing customer of Midas) said that the Railway Ministry has ordered the company to stop shipments after a series of delays on the new high speed rail link between Beijing and Shanghai. The delays were caused by the automatic braking system installed on the company’s trains and the company said that they are currently trying to resolve the issues before shipments can resume again.

􀁺 The above suggests that while Midas’ stock price has already tanked 33% since the high speed train crash on 22 July 2011 and 55% since the firing of the top-man in the Railway Minstry for corruption charges in mid-Feb ’11 (about in line with the sector’s average decline), it is still early days for investors attempting to bottom-fish.

Singapore Telecommunications - Dialing up our recommendation (CIMB)

NEUTRAL Upgraded

S$2.95 Target: S$3.36

Mkt.Cap: S$47,022m/US$38,455m

Telecommunications - Integrated

1QFY12 results preview

With competitive pressures easing in India and Indonesia, we are upgrading SingTel to NEUTRAL from Underperform. Our SOP-based target price is raised from S$3.19 to S$3.36 after incorporating higher consensus targets for Bharti and AIS and taking into account the impact of the stronger A$ and S$ relative to regional currencies. We expect SingTel to report a 4% qoq and 10% yoy increase in 1QFY12 core net profit, with the strong profit contributions from SingTel Singapore, Telkomsel and AIS mitigated by the weaker results at Bharti. The company is scheduled to announce its results on 11 Aug. Our key concern for SingTel is the prospect of rising competition in Australia and the strengthening S$ which could dilute its overseas contributions.

The details

SingTel’s core earnings are expected to continue recovering from its 2QFY11 low. The company should report a modest 4% qoq and 10% yoy core net profit growth in 1QFY12, as shown in Figure 1 below. This is broadly in line with both our and consensus FY12 forecasts. We expect earnings growth to be driven by:

• seasonally higher margins in Singapore as the telco usually books in a larger share of expenses in the final quarter of its financial year.

• Telkomsel, where 2Q11 core net profit increased 9% qoq but was flat yoy. Telkomsel’s revenue rose 6% qoq and yoy, outpacing XL Axiata’s 1.8% qoq growth. We think Telkomsel benefited from rotational churns at the expense of its smaller rivals.

• Advanced Info Service, where 1Q11* core net profit rose rose 6% qoq and 20% yoy. This was driven by the strong growth in prepaid voice and data, thanks to its superior nationwide coverage.

*SingTel books in contributions from AIS with a one quarter lag.

We believe SingTel’s 1QFY12 performance was dragged down by Bharti, where core net profit fell 4% qoq and 30% yoy. This was due to the higher effective tax following the expiry of its tax holiday in India. However, we are positive on Bharti, and the Indian telco sector in general, after the larger players raised their tariffs recently indicating a less intense competitive environment.

The performance of the SGD was mixed during the quarter. The SGD depreciated against AUD and IDR by 3% and 1% respectively. It strengthened against the INR, THB and PHP by 3%, 2% and 2% respectively.

Valuation and recommendation

Raising target price. We raise our sum-of-parts (SOP)-based target price from S$3.19 to S$3.36 after:

• Raising Bharti’s and Globe’s valuations based on the latest consensus target prices.

• Raising AIS’s valuation from THB101/share to THB131 following our recent upgrade.

• Raising our assumption of the Aussie dollar exchange rate from S$1.08/A$ to S$1.28, but lowering the Indonesian rupiah rate from Rp6,500/S$ to Rp6,900 and Indian rupee rate from Rs33/S$ to Rs35.6/S$.

• Cutting our valuations for Warid Pakistan, Pacific Bangladesh Telecom Ltd (PBTL) and Far Eastone Telecom based on their carrying values on SingTel’s balance sheet.

Global Logistic Properties - Another key strategic acquisition (DBSVickers)

BUY S$1.89 STI : 2,884.00

Price Target : S$ 2.80

• Buys 49% stake in Shanghai Yupei Group for US$53.6m

• Strengthening positioning and foothold in China

• Maintain Buy with TP $2.80

Strengthening foothold in China. GLP has entered into an agreement to buy 49% stake in Shanghai Yupei Group (SYG) from private equity fund Equity International for US$53.6m. SYG is one of the largest logistics developers in China with a completed portfolio of 11 buildings in 4 industrial parks totaling 0.25msm NLA in Shanghai (3), Suzhou (6) and Chuzhou (2) and a pipeline of 1.074msm GFA spread over Beijing, Shenyang, Wuhan, Guangzhou, Wuxi, Xiamen and Chengdu. GLP will also have 1 of the 5 board seats at SYG. In addition, GLP also has the option to acquire a further 1% stake in SYG as well as take a direct 70% share in 10 of the 11 completed assets. Should the option be exercised, the group will have an effective 85% stake in the underlying assets.

Strategic acquisition will deepen foothold and positioning in China. Although the actual impact on the transaction is difficult to quantify in the absence of more details, we see this deal as strategically positive for GLP. Besides consolidating its market share and positioning in China, the purchase will also provide a strong pipeline of development assets. This is GLP’s third acquisition since listing (bought stake in parent company of Blogis in Dec10 and stake in Airport City Devt in Jan11), which will strengthen its foothold in the modern logistics space in China, thus further extending the group’s leadership in the country. Besides being a strong testimonial to GLP’s business development capabilities, the transaction will also boost its pipeline visibility with a potential 1.074msm GFA landbank.

GLP’s share price has retraced in tandem with the market’s downturn and the stock is trading at a steep 33% discount to its sum of parts valuation of $2.80. Maintain Buy with target price of $2.80, pegged at parity to sum of parts valuation.

SingTel - 1Q12F may disappoint (DBSVickers)

HOLD S$2.95 STI : 2,884.00

Price Target : 12-month S$ 3.20

Reason for Report : 1Q12F earnings preview

Potential Catalyst: half yearly dividends

DBSV vs Consensus: 2% below consensus as Singapore earnings can decline despite stable EBITDA

• SingTel may report 1Q12F earnings of S$920m (-2% YoY) on 11th Aug, slightly below street expectations.

• The key negatives would be weak Singapore earnings besides lower contribution from Bharti

• In the long term, Bharti should improve although Singapore & Australia may face more challenges. HOLD for 6% yield at 12x FY12F PE (Hist. average 13.4x)

1Q12F results on 11th Aug may be unexciting. We estimate that SingTel may report 1Q12F earnings of S$920m (-2% YoY, - 8% QoQ). This may be slightly below the street expectations of flat to low-single digit growth in earnings

Singapore earnings could be the key disappointment Management has guided for stable Singapore EBITDA in FY12F taking into account high content cost for full FY12F and competitive pressures in the enterprise broadband business. However, depreciation & amortization expenses have been rising in the light of higher capex for mobile & submarine networks along with IT infrastructure. So stable EBITDA may not translate into stable net earnings. We estimate that 1Q12F Singapore earnings could decline 15% YoY, although improve 4% QoQ. Optus earnings may decline 17% QoQ, as 4Q11 (seasonally strongest quarter) benefited from one-off cost savings.

Associate contribution can slip marginally. Bharti reported 14% QoQ decline in 1Q12 earnings, which can partly be offset by 10% QoQ growth at Telkomsel. However, overall associates’ contribution may decline 3% QoQ due to strong Singapore dollar versus regional currencies (INR & PHP).

With 3% earning growth in FY12F, investors might appreciate regular yield exceeding 6%. SingTel is trading at ~12x FY12F PE below its four-year average of 13.2x. However, we believe that SingTel may not outperform unless earnings payout ratio is raised above 80% or capital management is performed more frequently. HOLD with SOP-based TP of S$3.20.

Wheelock Properties (Singapore) (KimEng)

Background: Wheelock Properties (WP) is well-known for its luxury residential property developments in Singapore, such as Ardmore Park, Ardmore II and The Grange Residences. Currently, Ardmore Three is the main project in its landbank that has yet to be launched, with a GFA of 170,351 sq ft.

Recent development: Following the recent market sell-down, WP is now trading at 0.75x P/B despite being in a net cash position. If the market weakness persists, valuations will become increasingly attractive for privatisation.

Key ratios…

Price-to-earnings: 6.6x

Price-to-NTA (as at Jun 2011): 0.75x

Dividend per share / yield: $0.06 / 3.4%

Net cash per share (as at Jun 2011): $0.42

Share price S$1.74

Issued shares (m) 1,196.6

Market cap (S$m) 2,082.0

Free float (%) 24.6%

Recent fundraising activities Nil

Financial YE 31 December

Major shareholders Wheelock & Co – 75.4%

YTD change -10.8%

52-wk price range S$1.705-2.040

Our view

Scotts Square nearing completion. The 338-unit Scotts Square is expected to obtain its TOP in 3Q11, after which each subsequent sale from the 92 units yet to be sold can be recognised in full. At an ASP of $4,000 psf, the remaining units are valued at nearly $190m. In addition, Scotts Square has a retail podium with an NLA of about 75,000 sq ft. Assuming a conservative average rental of $18 psf, the net property income from the retail podium is expected to be about $10m per annum. Luxury brand Hermes has already pre-committed to lease 3,000 sq ft of space.

Ardmore Three launch-ready by end-2011. WP has started building the showflat on site, which is targeted for completion by 4Q11. The 84-unit freehold luxury project is likely to be launched next year. We estimate the breakeven for the project to be around $1,800 psf, potentially generating net profit of $210m (17.5 cents per share) on an ASP of $3,300 psf.

Share price weakness increases privatisation probability. In its latest quarterly reporting, WP is still in a net cash position of $507.8m (or 42.4 cents per share). Following the recent market sell-down, the stock is trading at 0.75x P/B, increasing the likelihood of a privatisation by its major shareholder, Hong Kong-listed Wheelock & Co (20 HK), in our opinion.

Ho Bee Investment (KimEng)

Event

Ho Bee reported a net profit of $57.2m for 2Q11, down 55% from the previous year but in line with our expectation. Earnings in the second quarter came from an improved sale of The Orange Grove and maiden contributions from the redevelopment of One Pemimpin Drive, which collectively accounted for more than 60% of net profit. We remain hopeful that the pace of sales in the coveted residential enclave of Sentosa Cove will improve in the near term. Reiterate BUY.

Our View

The Orange Grove saw 12 units sold over 2Q11 with an average price of $2,370 psf, above our assumption of $2,200 psf. The redevelopment of One Pemimpin Drive is 76% sold and has achieved an ASP of $800 psf. Seascape also saw improved sales with the launch of the remaining units after the project received its TOP in February 2011. We estimate there remains about $580m ($0.80 per share) of sales to be progressively recognised, and we value Ho Bee’s remaining landbank in Singapore at $1.33b ($1.83 per share), of which 85% is on Sentosa Cove.

The final stages of Circle Line will begin operation on 8 October 2011. Among the estates that will benefit from the greater connectivity and shortened travel times is research hub one-north. We are therefore optimistic that the rental demand for the well-located The Metropolis, Ho Bee’s office development at one-north, will be strong. According to our estimates, the project could spawn a revaluation gain of $400m ($0.55 per share) upon completion in 2013. We have yet to factor this into our valuation.

We believe Ho Bee will participate in the tender for the second commercial site at Paya Lebar, having lost the first to a more aggressive rival in April 2011. The site has a GFA of 935,585 sq ft and has minimum allocations of 40% and 15% for office and hotel use, respectively. The tender will close on 18 October 2011. Using the winning bid for the first commercial site as a gauge, the second site is likely to receive bids of over $800m, which is well within what Ho Bee’s balance sheet can take.

Action & Recommendation

We reiterate our BUY recommendation and target price of $1.93, pegged at a 30% discount to its RNAV of $2.76 per share. The stock also trades below its book value per share of $2.13.

Ezion Holdings Ltd - US$55m contract to support LNG project in Australia (OCBC)

Maintain BUY

Previous Rating: BUY

Current Price: S$0.67

Fair Value: S$0.86

Awarded initial project worth US$55m. Ezion Holdings (Ezion) announced on Monday that it has been awarded an initial project worth about US$55m to provide full logistics and support services for the haulage of equipment and modules for the development of LNG facilities on Curtis Island, Queensland, Australia. The project is scheduled to commence in mid 2012, and we expect it to run for about 16 months.

Successful execution may mean more contracts. This LNG facility is the first out of eight proposed in Queensland, and is expected to have an initial capacity of 7.6m tones per annum (Mtpa). The Queensland government has estimated that 50 Mtpa of LNG could be produced from the Surat and Bowen Basins in Queensland that could be piped to the coast for export. Besides the earnings contribution from this contract, this is an important project for Ezion as successful execution may lead to further business opportunities for the group, for instance supporting the other LNG projects that are slated to come up in Australia.

Major LNG developments coming up. On 28 Jul, the board of Australia Pacific LNG (50-50 JV between Origin Energy and ConocoPhillips) announced that it had approved the development of one of Australia's largest LNG export projects on Curtis Island, providing an immediate trigger for the development and construction of project facilities, in which Ezion is a beneficiary. The approval will result in investment in the first phase of the project of US$14b to service the sale and purchase agreement with Sinopec Corp for 4.3 Mtpa - the largest single LNG sales agreement by annual volume ever signed for delivery from Australia.

Details about the contract. According to management, Ezion will provide about five pairs of tugs and barges for this initial project, with some chartered in and the rest built at yards in SE Asia. Capex required (excluding chartering costs) is estimated to be around US$40m, and we estimate that about 70% of this will be funded by debt. We assume net profit margin of about 20% (relatively lower as the vessels are on time charter, rather than bare boat arrangement). We have adjusted our earnings estimates after taking into account this latest development and based on 10x blended FY11/12F core earnings, our fair value estimate rises to S$0.86 (prev. S$0.79). Maintain BUY.

ARA Asset Management Ltd - Catalysts in sight (CIMB)

OUTPERFORM Maintained

S$1.40 Target: S$1.82

Mkt.Cap: S$1,076m/US$880m

Property Investment

• Catalysts in sight. At 22% of our FY11 estimate (1H11: 44%), the 2Q11 net profit of S$14.7m was slightly below consensus and our expectations. The variance came mainly from the weakening of the USD against the SGD although we also expect a stronger 2H11 with backloaded fees from Hui Xian REIT and the closing of ADF II. Factoring in later contributions from ADF II and a weaker USD, we lower our FY11-13 profit estimates by 4-7%. Our SOP-based target price dips from the previous exbonus S$1.89 to S$1.82. We believe the recent share price pullback provides a good entry point. ARA remains an OUTPERFORM with near-term catalysts from the successful securing of key investors and closing for ADF II. Mid-term catalysts could come from special dividends from performance fees from ADF I and roles to manage future HK Rmb equity offerings.

• Hurt by the USD. 2Q11 net profit grew 17% yoy on a 22% increase in recurrent REIT management fees, offset partially by weaker portfolio management and service fees and lower real estate management services fees. Results were dragged down by a weaker USD and management fees growth would have been a stronger 9% compared to the current 6% if not for the negative FX impact. Management fees from Hui Xian REIT contributed a maiden S$0.6m during the quarter. Management declared an interim dividend per share of 2.3 S cts (unchanged from 1H10 despite a 1-for-10 bonus issue) and will seek to maintain last year’s dividend per share of 4.8 S cts for the full year.

• On track for closing of ADF II. Despite a difficult fund-raising environment given the current market uncertainty, ARA successfully achieved a first closing in Jul with firm commitments of US$300m. With management in advanced negotiations with new investors and previous investors in ADF I, it remains confident of achieving committed capital of US$1bn by Oct and should start investing by 4Q11.

• Look to ADF I further down the road. ADF II’s predecessor, ADF I is, meanwhile, on track to generate returns in excess of its 10% hurdle rate and could produce oneoff performance fees on asset divestments in 2013. With ARA’s share of the performance fees estimated to be north of S$60m, this could translate into a special bumper dividend for investors in 2013.

CHINA FISHERY - Results in-line; valuations are attractive (DMG)

BUY

Price S$1.15

Previous S$1.77

Target S$1.50

3QFY11 net profit up 5% YoY, within our expectations. Net profit for the period came in at US$37m, which was down 18% QoQ. Earnings were supported by a 80% YoY increase in fishmeal operation revenue, which was partially off-set by a 16% YoY decline in revenue from the North Pacific operations. We have lowered our share base assumptions following CFG’s announcement on delays in its HK dual listing, and have fine-tuned our earnings estimates. Following the recent global sell-down in equity markets, we think CFG’s valuations look more attractive, and maintain our BUY call, but with a lower TP of S$1.50 (from S$1.77 previously), as we take into account a decline in valuations for its peers. Our TP implies an FY12 P/E of 8.2x, which is on par with the average FY12 P/E of its Oslo peers.

Valuations more attractive after sell-down; delay in HK dual listing mildly positive. CFG’s share price fell some 17% since early Aug 11 when global markets suffered a sell-down after US’ debt rating was downgraded. We think valuations appear even more attractive with CFG currently trading at 7.3x FY11/6.3x FY12 P/E. We believe its delay in HK dual listing (announced on 1 Aug 11) could also be mildly positive for the counter as we factor in less share base dilution (due to no new shares being issued) which provides a slight booster for FY11/FY12 EPS in our opinion.

Peru fishmeal operations drove 3QFY11 earnings. Fishmeal operations was the earnings driver for 3QFY11 with revenue expanding 80% YoY to US$81m mainly due to a 80% YoY increase in sales volume. The higher volumes were largely due to a higher TAC for the first fishing season in FY11 as well as higher inventory carried forward for sale from 2QFY11. We expect higher fishmeal inventory levels to support the coming quarter’s earnings as well.

EZION HOLDINGS - Secures US$55m contract in Australia (DMG)

BUY

Price S$0.670

Job awa rd positive; work to start in mid-2012. The US$55m initial contract to provide full logistics and support services for the Queensland Curtis LNG (QCLNG) project will begin in mid-2012. We are positive on the contract: (1) the job award is Ezion’s first job for the QCLNG project and we believe Ezion is well positioned to bid for more contracts; (2) assuming 18% net margin, we estimate US$10m net profit from this project over the duration of the contract. We maintain our EPS forecasts pending more details on the proposed capital raising exercise which we believe will be partially used to fund this project. Maintain BUY with an unchanged TP of S$1.07 based on 12x FY11/12F fully diluted EPS.

Investing in more assets to position for future growth. We understand that Ezion will provide at least ten tugs and barges to support the initial contract for QCLNG. Management plans to use more third-party tugs and barges at the start and is allocating ~US$40m to buy its own tugs and barges to support the contract and future opportunities on Curtis Island. This will be funded via a mix of debt and new capital to be raised from the proposed perpetual capital securities.

First project for QCLNG; expanding presence in Australia. The QCLNG is one of Australia’s largest capital infrastructure projects and is operated by the BG Group. Construction of the LNG project is underway, with first LNG delivery expected in 2014. This is Ezion’s first contract for the QCLNG project. Aside from this project, Ezion is also involved in the Gorgon project under the Offshore Marine Services Alliance (OMSA) Joint Venture. We believe Ezion has the right track record, experience and assets in Australia to benefit from rising LNG construction activities.

The art of war: Negotiations

It astounds me these days how people are going around buying properties. It’s as though money is like water. Whenever an agent or developer tells them that it’s the best of cheapest buy in town, they buy it, hook line and sinker.

More and more reports are coming out these days on the ballooning prices of properties in the market. It still amazes me that investors tend to turn a blind eye or a deaf ear to these warnings.

“So, what should we do then?” one anxious new investor once asked me.

Well, the answer is simple; should you need to keep buying, go for the great deals in the market.

“Where can we find such deals?” they reply. Everywhere.

It’s true, great deals are everywhere, you’ll just have to keep looking, doing your research, digging for the facts and figures, and eventually, a potentially good find might come up.

Then, you’ve got to negotiate it down to get a great deal.

“Huh? I have to negotiate the deal?” ask the same anxious investor.

The answer is a resounding YES! Of course you do. You negotiate when you buy meat at the wet market, or when you shop at the pasar malam (night markets), so, why would you (not) negotiate when buying property?

How do you suppose great deals come along. Even though a seller may be motivated, they will most certainly post it at market price first. It is up to you to peel away the layers and find out how great a deal you can obtain. I’ve attached some excerpts from my up coming book, First be free, then be rich, on negotiating deals as a reference to what I’m mentioning. I hope it helps!

“Let’s sit and talk” was what I proposed to the agent.

It is a great find. It was a 3-storey commercial shop lot that is situated right across a main road. Visibility is good, accessibility is good and the valuation came back at RM1.1mil to RM1.2mil. The owner is a busy businessman who has not seen his own property for the past 2 years. All the 3 floors were tenanted and upon renewal, all have agreed to increase the rental by another 15%, making the total rental returns of 7.7%.

This is it. I was sitting facing the agent. We’ve viewed and assess the property and it is in fair condition. It was now time to negotiate a deal with the agent. A tingling feeling of nervousness flows through me, as we sit. With a smile on my face, I started with a little bit of small chat, asking the agent of his background, moving on to find out more about the history of the property and also the story behind the owner. Finally, it was time to ask the question.

“So, how much is the owner willing to let this property go at?” I asked. The agent replied “Well, the owner is pricing it at about RM970K negotiable, what’s your budget?”

The moment I heard the price, I knew it was a good buy! My heart starts racing, my mind starts screaming “buy! Buy! BUY!” It was a struggle to calm myself and have proper negotiations at the same time.

As much as I wanted the deal, I kept to my rules and started the negotiating on the deal with the agent. We got into the details of the property, worked out the maths of the rental, viewed the unit and checked out the tenants. All the while, we kept mum about our intentions to buy and didn’t show our excitement on the deal.

It was 30 minutes into the negotiations. We eventually lead ourselves to a local coffee shop nearby. The agent, anxious to close the deal, was either on the phone with the owner or talking to us with regards to the property and the deal.

A negotiation in process between house buyers and house sellers.

Occasionally, he would walk away from the table while on the phone. We concluded the deal on that day, but not before knocking the price down a further RM100K, placing terms of purchase onto the booking form in favor of us as well as doing the proper due diligence with the necessary documentation.

We finally shook hands with the agent after 5 calls being transacted to and fro the seller with a couple of harrowing near call-offs, both on my side as well as the seller, for various reasons. This all took place under an hour. As we shook hands and departed, there was a sigh of relief, and satisfaction, for a job well done.

I would like to leave you with 3 main key points to take away when negotiating deals.

1. Always go in numbers.
Don’t be superman and try to do everything yourself. Get a friend or family member to go with you, when negotiating deals. Besides the safety aspect, going in numbers has several key benefits which I would like to share. When negotiating deals, try to have at least 1 to 3 (maximum) friends along with you. How would an agent feel, if there was 2 or 3 of you present during the viewing?

Yes. Agents would be a bit more intimidated. The power is in the numbers. Also, your partners can inspect the building for damages or potential hazards, and point them out to you when you are busy doing your negotiations.

When I’m following a friend along, on a deal, I sometimes comb the area, call other agents and even talk to neighbors, to find out more information about the area, to feedback to my friend.

2. Always go with a price in mind
Never go into a negotiation without having a price in mind. How do you determine a good price for the area?

Do you research. I’m surprise how people go into deals without doing proper due diligence, prior to closing the deals. Here’s a couple of things that may help, prior to negotiating a deal.

a. Compare and look for at least 8 ads on the same property in the past, to determine if you’ve got the best deal

b. Call and speak to at least 5 agents

c. Visit and view at least 2 properties

d. Call at least 3 banks to obtain valuation

Once you have obtain all the information, then make the appointment and go into the deal.

3. Close the deal on the day
If you’ve completed the deal, close it on the day. Never leave the scene and allow the agent or owner too much time to think. I have seen great deals lost because of the owner or agent getting cold feet, a day after the deal is made. It’s common.

If you have spent hours negotiating a great deal, close it. Make sure the agent pens down the booking form, calls the owner and gets a verbal confirmation of the deal. If possible, speak to the owner and confirm the deal and thank them for it. All this is vital to ensure that everyone is serious on the deal.Yes, that also means that you would have to prepare the money for the 2%/ 3% deposit. Best to avoid giving cash. Write a check instead.

Also remember to follow up. A deal is not a deal until the sales and purchase agreement is signed with the owner.Finally, upon closing the deal, always seal the deal with a firm handshake.

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Michael Tan is part of an organisation call FREEMEN which focusses on educating people towards their financial freedom, particularly in the field of real estate investment. FREEMEN has conducted more than 10 courses in the field of investment methodologies and mindset. For more information on upcoming events, SMS to 019 2799 636 or email them at Magdelinelim@freemen.com.my

Venture Corp: Bumpy ride ahead (DMG)

(NEUTRAL, S$7.27, TP S$7.47)

Lowering earnings forecast, but maintain NEUTRAL rating. 2Q results came in below expectation with S$628.7m in revenue (-3.7% YoY) and S$42.0m in profits (-8.4% YoY). 1H earnings accounts for only 41% of our estimates as the performance was impaired by a slower segment revenue growth and a rapid decline of USD/SGD (-11.0% YoY). We lowered down our FY11 revenue and earnings estimate by 15.1% and 5.8% respectively to factor in the weakening industry outlook and escalating currency risks. We maintain NEUTRAL on the stock, but lower our TP to S$7.47, pegging to 10.8x P/E (-1 SD 5-yr historical forward P/E).

Growth slowed and margin slide. Stripping out the translation loss, both Test & Measurement and Retail Solution segments continue to drive the group forward with 17.6% and 15.6% YoY growth respectively. However, the growth still fell short of our expectation as we were eyeing 25%. Meanwhile, 2Q net margin has also fallen slightly by 30bps to 6.7% YoY due to price erosion.

Gloomy manufacturing outlook and higher currency risks. Manufacturing activities have slowed significantly signalled by the tumbling of PMIs (Purchasing Managers Index) across the world. We anticipate this to drag on Venture’s 2H performance, especially its electronics manufacturing services (EMS) segment (65% of FY10 revenue). Moreover, the risks for USD to continue to depreciate remain high, which will hit Venture.

Healthy balance sheet to provide downside cushion. Venture continues to carry a healthy balance sheet. It is sitting on a net cash balance of S¢38.3/share. This strong cash reserve will act as a protective cushion amid global uncertainty and we expect the group to continue its sound dividend payout of S¢50/share, translating to a yield of 7.6%.

Ezion Holdings: Results slightly ahead of forecast; re-iterate BUY (DMG)

(BUY, S$0.67, TP S$1.07)

Strong jump in core earnings; re-iterate BUY. 2Q11 core net earnings of US$12.2m (+6% QoQ +85% YoY) lifted 1H11 core net profit to US$23.7m (+96% YoY), and accounted for 52% of our FY11F estimate and 55% of consensus. Reported 1H11 net profit of US$34.7m included US$11m one-off gain from divestment of one liftboat. The strong results reaffirmed our positive view on the stock. Management plans to raise new capital by issuing perpetual capital securities and we believe this is done in anticipation of a new sizeable project. We keep our FY11-12F EPS estimates unchanged pending further details on the capital raising. We see scope for an upward revision in FY12F EPS. Our TP is unchanged at S$1.07 based on 12x blended FY11/12 P/E. Re-iterate BUY.

Higher utilisation of logistics fleet boosted earnings. The stronger earnings came on the

back of higher utilisation of its offshore logistics fleet. Utilisation level in 1H11 was ~85% compared to average utilisation level of ~75% level in FY10. Two liftboats were deployed in 2Q11 (one in 2Q10; two in 1Q11) and this is in-line with expectation. Ezion took delivery of its third liftboat in end Jun 2011 and we expect new contribution from 3Q11 onwards. The new liftboat is being deployed in South East Asia and Africa on a three plus two years contract.

Raising capital from SGD denominated perpetual capital securities. Ezion is raising new capital to prepare the company for potential projects in Australia but has not decided on the amount to be raised. We understand that the structure of the capital raising is somewhat similar to perpetual preference shares but the option to redeem the shares lies with the company. We have not factored in any impact of the capital raising at this juncture given the lack of details on the terms and deployment of the capital. In our view, the announcement of the capital raising exercise could mean that Ezion is close to winning a sizeable job.

CWT: No surprises (DMG)

(BUY, S$1.26, TP S$1.73)

CWT's 2Q11 core earnings were in line with our expectations, making up 24.8% of our FY11

estimates. 2Q11 core earnings were up 32% YoY mainly due to higher contribution from Contract Logistics. We remain positive over CWT’s long term prospects with its continued business development initiatives, which include the development of a new warehouse. In addition, contributions from MRI Trading AG’s (MRI) would kick in from Jul 11. We are maintaining our earnings forecasts and reiterating our BUY recommendation with a TP of S$1.73, based on 20.8x FY11 earnings (a 20% discount to global peers’ 7-year historical average).

Core earnings within expectations. CWT’s 2Q11 core earnings was up 32% YoY, coming in at

S$8.7m, attributable to higher contributions from Contract Logistics. 2Q11 revenue leapt 25.8% YoY to S$229.9m, on the back of an increase in business activities on the whole, particularly from coal trading, Commodity Logistics and Integrated Logistics services.

Growing its asset base with new warehouses. CWT Hub 3 has obtained TOP in Apr 11 and is currently 85% occupied, with the remaining space fully committed. Meanwhile, the 330k sqf Pandan Logistics Hub is on track for completion in 4Q11. In addition, CWT is building a 725k sqf CWT Cold Hub 2 to be completed by Jan 2013. With a strong pipeline of warehouses being built and completed progressively, it is likely that CWT would continue to perform more asset divestments to REITs moving ahead, which may allow shareholders to continue to enjoy special dividends.

Focusing on integrating MRI Trading AG. Following the completion of a 73.81% stake in base metal non-ferrous concentrates physical trading group MRI in July, management is focusing their efforts on maximising MRI’s earnings potential, as well as to realise synergies arising from the integration of trading and logistics supply chain management activities. We believe this acquisition is a quantum leap for CWT, enabling it to achieve its goal to be a niche player in commodity logistics globally. In our forecasts, we have assumed S$1b of revenue contribution from MRI in FY11.

CapitaLand: Well positioned for deployment (DMG)

(BUY, S$2.80, TP S$3.52)

Resume coverage with BUY. We believe for CapitaLand with its asset recycling business model as an integrated developer with its multi-geographical, multi-segment exposure with two additional channels of growth in Ascott and CMA. We resume coverage of CapitaLand at BUY, with a target price of S$3.52 based on 20% discount to RNAV.

Not exceptionally, 2Q11 boosted by exceptionals. CapitaLand’s 2Q11 were in line with expectations, with 2Q11 revenue at S$740m (+25.0%YoY) while net profit is at S$399m (+17.4%YoY) driven by development project contributions including The Interlace, The Wharf Residence, Urban Resort Condominium in Singapore and completed China project, Riverside Ville, as well as partly higher fee-based income (+18% YoY) to S$29.1m on growth in AUM to S$31.7bn (+20% YoY).

Net income for 2Q11 was boosted by net revaluation gains of S$228m which includes fair value gains from its various REIT vehicles and China funds. Ex-reval/impairments, PATMI grew +26.6% YoY to S$171.3m for 2Q11. However we note this figures are again boosted by including S$125m from sale of residential site in Shanghai/Blife units and sale of New Minzhong Leyuan Mall.

1H11 deployment focused in Singapore. We believe the market’s focus for CapitaLand likely revolve around its capital deployment and speed of asset turn. The OODL transaction is already bearing fruit, with S$1bn of the S$3.1bn investment realised. Post OODL acquisition, CapitaLand has actively committed c.S$5bn capital in 1H11 either direct or through its listed entities, with an evident focus on deployment in Singapore. CapitaLand is well positioned for investment opportunities in the near term especially in China if deterioriating credit conditions persist, with S$6bn cash hoard and ample debt headroom at net gearing of 0.23.