HI-P (Lim&Tan)

S$0.88-HIPS.SI

􀁺 Hi-P’s second largest customer (Apple) whom we estimate contributes about 15-20% of sales surged 7.5% in after hours trading to hit an all time record high after its 3Q ended June 2011 sales and profit beat market expectations by a wide margin (net profit surged 125% yoy to US$7.79 a share ahead of expectations of US$5.87 a share while sales surged 82% to US$28.6bln, ahead of expectations of US$25bln) on the back of better than expected demand for their iPad, iPhones and Macbooks.

􀁺 Apple has been instrumental in turning around the fortunes of Hi-P since it started mass production for this new customer around 2Q 2010 when its bottom-line turned around from 1Q 2010’s first ever loss of S$14mln.

􀁺 While the continued strength of Apple would continue to benefit Hi-P, we understand that competitive pressures are also increasing and unfortunately, Hi-P’s largest customer Research In Motion (RIM) whom we estimate contributes about half of its revenues has also been providing down-side surprises in terms of product delays and market share loss (as a result of profit disappointments, RIM’s share price has crashed 62% from its 2011 high and is even 26% below its Mar’2009 lows when global markets bottomed after the Lehman crisis; giving it a trailing PE of only 4x).

􀁺 This together with rising cost pressures resulted in Hi-P’s recent downward profit guidance for 2Q 2011.

􀁺 Since Hi-P’s profit warning at the end of June 2011, its share price has fallen 13%, ahead of its sector peers Venture and Hon Hai’s 8-9%. Before that it has basically been tracking the share price performance of its peers.

􀁺 We maintain our Sell recommendation.

VICOM (Lim&Tan)

S$3.76-VCOM.SI

􀁺 Vicom is likely the only stock scaling new heights in an overall lousy market , rising 37 cents or 11% % in just 5 trading days from July 7th.

􀁺 We would not rule out Comfort Delgro finally deciding to privatizing Vicom:

a. Comfort Delgro already owns 68.1% (at say $3.76, such an exercise will cost just over $100 mln);

b. Trading liquidity is understandably poor, averaging 11,000 shares a day in the year-to-date;

c. Vicom has a “clean” balance sheet, with $53.1 mln cash and no borrowings at end Mar ’11;

d. Its shareholders are largely retail, given the top 10, including Comfort Delgro and only one institutional shareholder - Fidelity with 3.67%, collectively own 74%;

e. A Scheme of Arrangement would likely be the most effective way to carry out this exercise;

f. Exit Offer may not have to be set a too-big a premium to current market (already 3.3 times Mar NAV of $1.142 a share), having already surged 29% since end ’10 (STI was down 3% during the same period), and the unlikelihood of a competing bid.

􀁺 We do no have a call on the stock primarily because of poor liquidity.

Capitamall Trust - Enhancement works gain traction (DBSVickers)

BUY S$1.94 STI : 3,096.12

Price Target : 12-Month S$ 2.05

Reason for Report : 2Q11 Results

Potential Catalyst: Higher rental reversions

DBSV vs Consensus: Factored in lower rental reversion compared to street

• 2Q DPU of 2.36cts, together with 1Q DPU will make up 48% of our FY11 estimates

• Asset enhancement works to drive revenue growth

• Maintain BUY, TP S$2.05

DPU of 2.36 Scts is inline with expectation. Distributable income increases 3.1% yoy to S$75.5m. This was achieved through a 12% rise in revenue with NPI increasing by a slightly lower 7.7 % to $106.4m, eroded by higher operating expenses. On a qoq basis, performance was relatively stable. The group recorded revaluation gain of S$85.2m on the back of better rental outlook and c10 bps cap rate compression.

More offerings ahead Operation-wise, the group renewed 352,154 sf of NLA (c8.9% of portfolio’s NLA) in 1H with leases contracted at 7.8% growth. This was supported by a 3.6% yoy higher shopper footfall and 8.0% higher retail sales. Leasing demand remained strong with JCube achieving pre-commitment of approximately 80% to date. Meanwhile occupancies at Atrium@Orchard and Illuma are likely to see further downsides as asset enhancement intensifies/begins. Construction at the Jurong Gateway is also expected to commence by end of the year.

Robust balance sheet to fund development activities. With only 19.8% or S$87.75m of the outstanding S$444m CBs being exercised, the group is expected distribute the remaining S$13.5m from the S$18m income retained earlier. Meanwhile, the group has secured a new debt facility to refinance its S$346.4m share of Raffles City CMBS at lower interest rate, hence the average debt to maturity is extended from 2.6 to 3.6 years and interest cost down by 10 bp to 3.6%. Gearing has also dipped marginally to 38.2%. The next financing exercise will only be due in Oct 2012 highlighting the trust’s strong financial position to undertake the construction of Jurong Gateway starting end of this year.

Maintain BUY, TP S$2.05. We have adjusted our FY11 and FY12 DPU by +1% to 9.8cts and 10.8cts respectively due to the lower interest cost translating to a yield of 5.1% and 5.6% respectively. At the current price, the stock offers an 11% total return.