Market Pulse 121219 OIR

8/13/2019 Market Pulse 121219 OIR

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Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

Please refer to important disclosures at the back of this document. MICA (P) 039/06/2012

Morning Call19 Dec 2012

Asia Pacific Equity Research | Singapore

MARKETPULSE

Key Idea

SG Residential Property: Spate of privatizationscould comeGiven the current environment of low borrowing costs andsteep trading discounts to RNAV for high-end developers, itis likely that we could see a spate of privatization activityahead. We believe potential candidates for privatizationinclude those are trading significantly below RNAV, have a

low public float, and have major holders with stakes above50%. These criteria yield two additional candidates forprivatization: Ho Bee and Wheelock. For physical homesales, we saw ~20.9K new homes (excluding landed andEC) sold by developers year to date, of which the bulk(74%) are mass-market units. As interest rates remain low,we believe that continued monetary liquidity in the marketwould underpin demand for mass-market units. We forecastfor mass market property prices to appreciate 0%-5% in2013. For high-end property, we expect prices to dip 0% -10% in 2013, due to the impact of recent cooling measures.We maintain our OVERWEIGHTrating on the residentialproperty sector and expect continued strength in the mass-

market segment in FY13. Our top stock pick is CityDevelopments [FV: S$13.96, BUY] for its sharp execution,effective land-banking strategy and strong balance sheet.( E l i L e e )

News Headlines

US stocks rose for a second day on Tue, on signs ofprogress towards a deal to avoid the fiscal cliff ofspending cuts and tax increases next year. The Dowended 0.9% higher at 13,350.96, while the S&P 500

Index rose 1.1% to 1,446.79 and the Nasdaq finished1.5% higher at 3,054.53.

Cambridge Industrial Trust (CIT) has agreed to buy anindirect 60% stake in a 316k sq ft industrial facility in theJTC Tuas Biomedical Park for S$15.0m that will be leasedto a unit of pharmaceutical company Strides Arcolab for25 years. The property was introduced to CIT by sponsorOxley Global, which will own the remaining 40% stake.

Hiap Seng Engineering has won a THB652m (S$26m)structural steel fabrication contract for a liquefied naturalgas terminal project in Australia. Work on the project isexpected to begin early next year and is scheduled forcompletion by May 2014.

Key Singapore Indices

Close Chg % Chg

STI 3156.8 -1.9 -0.1

Catalist 146.7 2.4 1.7

Finance 807.6 0.9 0.1

Property 777.0 0.2 0.0

Electronics 515.9 -1.5 -0.3

Vol(m) 2790.4 507.9 22.3

Val(S$m) 1514.5 482.2 46.7

World Indices

Close Chg % Chg

Dow Jones 13351.0 115.6 0.9

Nasdaq 3054.5 43.9 1.5

S&P500 1446.8 16.4 1.1

FTSE 5935.9 23.8 0.4

KLCI 1659.4 10.9 0.7

Hang Seng 22494.7 -18.9 -0.1

Nikkei 9923.0 94.1 1.0

SET 1362.9 3.9 0.3

KOSPI 1993.1 10.0 0.5

TWSE 7643.7 12.5 0.2

Market Statistics (SG)

STI 52-week range 2,607 3,173

No. of gainers 298

No. of losers 195

No. of unchanged 195

Economic Statistics

S$/US$ 1.2 0.0

Yen/US$ 84.3 0.0

3-mth S$ SIBOR 0.4 0.0

3-mth US$ SIBOR 0.3 0.0

Crude futures (US$) 87.9 0.7

Research Team(65) 6531 9800e-mail: [email protected]


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OCBC Investment ResearchMarket Pulse19 Dec 2012

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SG Residential Property: Spate ofprivatizations could come

Privatizations could lie aheadHo Bee and Wheelock candidatesfor privatizationMass-market sales to stay firm

Spate of privatizations could come.As indicated in our last residential sectorreport dated 26 Jun 2012, there is deepvalue embedded in high-end developerstocks. As a group, SC Global (before itsprivatization offer), Wing Tai and Ho Bee, arenow valued at 0.76x books value, still belowaverage levels seen over 2Q09-2Q11. Giventhe current environment of low borrowingcosts and steep trading discounts to RNAV forhigh-end developers, it is likely that a spate

of privatization activity lies ahead. Webelieve potential candidates for privatizationinclude those are trading significantly belowfair value, have a low public float, and havemajor holders with stakes above 50%.

Possible privatization candidates: HoBee and WheelockFrom our criteria, we find two likelycandidates for privatization: Ho Bee andWheelock. Ho Bee is currently trading at0.76x book, with a public float of 25% and amajority shareholder stake of 69%. Wheelockis currently trading at 0.79x book with a 24%public float and a major shareholder stake of76%. Already we have seen the mainshareholder of SC Global, Simon Cheong,make a voluntary unconditional cash offer ofS$1.80 per share for all issued ordinaryshares. One possible implication ofprivatization is that, as a non-foreigncompany, SC Global could avoid thequalifying certificate penalties related to notselling off projects two years after achievingTOP.

Mass-market prices likely to stay firm still a mass market story in 2013Year to date, we have seen ~20.9K newhomes (excluding landed and EC) sold bydevelopers, of which the bulk (74%) aremass-market (OCR) units. As interest ratesremain low, we believe that continuedmonetary liquidity in the market wouldunderpin demand for mass-market units. Weforecast for mass market property prices toappreciate 0%-5% in 2013. For high-endproperty, we expect prices to dip 0% - 10%

in 2013, due to the impact of recent coolingmeasures.

Maintain OVERWEIGHT on sector.We maintain OVERWEIGHTrating on theresidential property sector and expectcontinued strength in the mass-marketsegment in FY13. Our top stock pick is CityDevelopments [FV: S$13.96, BUY] for its

sharp execution, effective land-bankingstrategy and strong balance sheet. ( El i L e e )

. . . . .


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Calendar of key events

17-Dec-12 18-Dec-12 19-Dec-12 20-Dec-12 21-Dec-12SG Nov NODX US Nov Housing Starts US 3QGDP

US Dec Philadelphia Fed

US Nov Existing HomeSales

US Nov LeadingIndicators

US Dec U of MichiganConfidence

24-Dec-12 25-Dec-12 26-Dec-12 27-Dec-12 28-Dec-12SG Nov CPI

US Nov Durable GoodsOrders

SG Nov Industrial

Production

US Nov New Home Sales

31-Dec-12 01-Jan-13 02-Jan-13 03-Jan-13 04-Jan-13

07-Jan-13 08-Jan-13 09-Jan-13 10-Jan-13 11-Jan-13

14-Jan-13 15-Jan-13 16-Jan-13 17-Jan-13 18-Jan-13

Notes: All US Tech results dates have been adjusted to Singapore dates.

US Initial jobless claims are released every Friday.MBA mortgage applications are released every Wednesday.


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SHAREHOLDING DECLARATION:

For shareholding disclosure on individual companies, please refer to the latest reports of these companies.

DISCLAIMER FOR RESEARCH REPORT

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed inwhole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation forthe subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that theinformation contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy orcompleteness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained inthis report is subject to change without notice. We have not given any consideration to and we have not made any investigation ofthe investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, nowarranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result ofthe recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from afinancial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives,financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd,OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors andofficers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking andother investment or securities related services for the corporations whose securities are mentioned in this report as well as otherparties generally.

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RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented.

- OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon.- As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total

returns within +/-10% range; a SELL rating indicates total returns less than -10%.- For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD

trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

Co.Reg.no.: 198301152E

Carmen LeeHead of Research

For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

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Market Pulse 121219 OIR