Thursday, December 22, 2011

Using PEG to Find Top Stocks

5 Stocks With Magic PEGs






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, On Friday 2 December 2011, 6:35
What if you could find a stock that had both value and growth? That would be a stock that had great potential. Some investors consider companies with both value and growth to have the magical combination.

But what does the 'magical combination' mean, exactly?

Value investors have long looked to the price-to-earnings ratio as a means to finding value stocks. We all know that the lower a P/E ratio, the cheaper the stock.

However, Benjamin Graham, long considered to be the 'father' of value investing, found that a low price-to-earnings ratio wasn't enough to unearth the true undervalued companies.

Using PEG to Find Top Stocks

To find the true undervalued stocks, Graham combined the low price-to-earnings ratios with the power of growth by using the PEG ratio. The PEG ratio is calculated by taking the price-to-earnings (P/E) ratio and dividing it by the growth rate.

Normally, a stock with a PEG ratio under 1.0 is considered a magical combination: a stock with both value and the sometimes illusive growth.

Recently, with stocks selling off, some companies that had only the growth component, now also have the value component.

When a low PEG ratio is combined with the powerful Zacks Rank, it makes the magical combination of growth and value even more explosive.

5 Stocks With Magical PEGs

1. Deere & Company
2. Apple
3. National Oilwell Varco
4. Norfolk Southern
5. CF Industries

1. Deere & Company

Deere (NYSE: DE - News) makes agriculture and construction equipment for customers around the globe. The 174-year old company just reported a record fiscal 2011. Who doesn't know its famous green tractors?

PEG: 0.7
Expected EPS Growth for Fiscal 2012: 16.7%
Zacks #2 Rank (buy)

Shares have pulled back in recent months on worries of a global economic slowdown. That's created a buying opportunity.


2. Apple Corporation

Apple (NasdaqGS: AAPL - News) needs no introduction. Analysts expect the company to have a very good holiday season on the strength of the iPhone and iPad.

PEG: 0.5
Expected EPS Growth for Fiscal 2012: 25%
Zacks #2 Rank (buy)

Since Steve Jobs death in October, and its first earnings miss in years, shares have retreated. This is a rare chance to buy a tech stock with both value and growth (not to mention a cash hoard that could bail out several European countries.)


3. National Oilwell Varco, Inc.

National Oilwell Varco (NYSE: NOV - News) makes equipment and components used in oil and gas drilling. Think 'drill, baby, drill.'

In the third quarter, the Rig Technology segment had a record $3.9 billion in new orders, including a single $1.5 billion order for 7 drillship packages which was its largest order ever.

PEG: 0.9
Expected EPS Growth for 2012: 25%
Zacks #2 Rank (buy)

Shares rebounded after the summer sell off but are still under the recent multi-year highs.


4. Norfolk Southern Corporation

Norfolk Southern (NYSE: NSC - News) operates a railroad on 20,000 miles of track in 22 states and D.C. It is heavily concentrated in the ports of the East Coast and is a big transporter of coal and other industrial goods.

PEG: 0.9
Expected EPS Growth for 2012: 12%
Zacks #2 Rank (buy)

The railroads have been hot. Norfolk Southern added about 4000 employees this year and expects to hire another 2600 in 2012.

Its shares have also been hot. They retreated in the summer sell-off but have since regained the multi-year highs. But even at the highs, NSC has a forward P/E of just 14.


5. CF Industries Holdings Inc.

CF Industries (NYSE: CF - News) is the second largest nitrogen fertilizer producer in the world. With farmers cashing in on record incomes this year, and commodity prices remaining elevated, its not surprising that CF's earnings exploded this year. EPS is expected to rise by 162% in 2011.

Yet analysts are nervous that growth has peaked as earnings are expected to be, essentially, flat in 2012.

PEG: 0.5
Expected EPS Growth for 2012: 2%
Zacks #2 Rank (buy)

Shares have been on a roller coaster the past few months. Yet they continue to be dirt cheap as investors nervously ponder 2012. CF has a forward P/E of only 6.2.


Good Brands That Have Both Value and Growth

It's easy to use the PEG ratio and the Zacks Rank to find companies that have the magical combination.

Right now, it's an embarrassment of riches to have so many big time brands with both attractive valuations and growth. These five companies have collectively been around for decades yet are still producing tremendous growth.

The PEG ratio is just one of many stock picking strategies investors can deploy. But for value investors, it's an important tool to add to your arsenal.

[The author of this article owns shares of CF.]

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at traceyryniec.
Zacks Investment Research


Source/转贴/Extract/Excerpts: yahoo.finance
Publish date: 01/11/11

2012 Navigating -Singapore (CIMB)

2012 Navigating
Be patient, the time will come
In a war where bears threaten to overwhelm, the only counter is guerilla warfare (short-term trading) or sniping (aim for the right stocks, right prices). Much of the sniper’s work involves choosing the battlefield, laying the ground. We suggest investors do the same.


We maintain our end-CY12 FSSTI target of 2,680 (1.3x P/BV) but expect markets to head lower before they can recover. We identify FSSTI levels at 2,280 where we would stop being such a bear and turn more constructive. Picking winners for the Asian decade ahead will then be more fruitful.

Too early to get bullish
We reiterate our fears that the world could be heading for a European banking crisis and eventually, a US currency crisis. The global outlook is akin to dominoes quivering in the wind. All eyes are watching for the first big domino to fall: the Italian bond market. There’s no obvious solution in Europe except printing money. There is no ECB rule that allows for this transient ‘solution’, unless the peripheral commits itself to more hardship. As Europe cracks and cleanses itself of debt, the spotlight will shift to a stalling US with higher debt ratios. We reckon a sovereign default in Europe is just the starting point of a global debt-cleansing act. Singapore equities would get dragged down by sentiment and could get cheaper.

Prefer defensive sectors
With a defensive top-down view, we are Overweight on Telcos and REITs, Underweight on Property, Transport and, Capital Goods. We are Neutral on Financials and Commodities. Banks may have less downside to troughs than other cyclicals; they will also have opportunities to win market shares as rivals pull out. Commodities have underperformed sharply after disappointing results and warrant a less bearish stance.

Stock picks
Other than defensive REIT and Telco picks, we believe it is opportune to position in strong Asian franchises that could benefit from the rising Asian consumer. Our picks in this category include DBS, Genting Hong Kong, GLP, Olam and Wilmar.



Too early to get bullish
We reiterate our fears that the world could be heading for a European banking crisis and eventually, a US currency crisis. The global outlook is akin to dominoes quivering in the wind. All eyes are watching for the first big domino to fall: the Italian bond market. There’s no obvious solution in Europe except printing money. There is no ECB rule that allows for this transient ‘solution’, unless the peripheral commits itself to more hardship. As Europe cracks and cleanses itself of debt, the spotlight will shift to a stalling US with higher debt ratios. We reckon a sovereign default in Europe is just the starting point of a global debt-cleansing act. Singapore equities would get dragged down by sentiment and could get cheaper.

Prefer defensive sectors
With a defensive top-down view, we are Overweight on Telcos and REITs, Underweight on Property, Transport and, Capital Goods. We are Neutral on Financials and Commodities. Banks may have less downside to troughs than other cyclicals; they will also have opportunities to win market shares as rivals pull out. Commodities have underperformed sharply after disappointing results and warrant a less bearish stance.

Stock picks
Other than defensive REIT and Telco picks, we believe it is opportune to position in strong Asian franchises that could benefit from the rising Asian consumer. Our picks in this category include DBS, Genting Hong Kong, GLP, Olam and Wilmar.

Be patient, the time will come
1. 2011 REVIEW
1.1 The world wakes up to the evils of debt
2011 was a year when the world woke up to the reality that piling more debt onto debt cannot solve problems. The year started with investors hopeful enough of QE2 supporting share prices, but an Arab spring and a Japanese disaster quickly quashed hopes. In Singapore, cyclical stocks failed to shine. By 2Q, only Telcos made positive returns. We downgraded Singapore (to Neutral) first in May and next (to Underweight) in August. We held a non-consensus view early in the year that we were heading for a European banking crisis and a dollar confidence crisis. Over 2011, Telcos and Media outperformed; Financials, REITs and Capital Goods tracked the index. All other sectors underperformed.

1.2 Europe dominates, but the US is also at risk
At the threshold of 2012, consensus is very bearish on Europe but expects the US and China to muddle their way through. We think that will be the best case. Hurdle #1: Greek debt of every maturity trades at 35cts/dollar. Media reports say the Greeks want a proposed bond swap to cut the recoverable NPV of new bonds to just 25cts/dollar - much deeper than the 50% haircut originally agreed. We wonder if all bondholders will still take it as voluntary. Bank of England presciently urged Europe to differentiate between a solvency problem and a liquidity problem. Hurdle #2: Italy, while still a liquidity problem for now, can morph into a solvency problem as this drags on. Global financial institutions are slashing GIIPS debts as bond markets no longer tolerate a push-back of debt problems even as politicians conjure all kinds of solutions to postpone the inevitable. Liquidity solutions buy time, solvency solutions address the real debt issue but will be extremely painful for the people. Social unrest will intensify. Should the euro bloc split up, financial institutions would fail and an economic slowdown would port over to the US and China. US banks and companies will undergo a testing time, as assets go bad. The US is not as benign as markets seem to think. Even with the benefit of time, the Super Committee has failed to cut a fraction of the big US deficit. What happens when the market forces it to rush? Does it print more money until the world loses faith in the dollar?

2. 2012 OUTLOOK
2.1 Consensus is defensive by now, no reason to differ
We maintain our Underweight on the Singapore market and our end-CY12 FSSTI target of 2,680 (1.3x P/BV). We think global issues will continue to dominate. There will be a time to buy stocks; not now. We reckon the FSSTI could break 2011’s low of 2,529 in 2012. We prefer defensive sectors like Telcos and REITs. We think that the world is in a balance-sheet depression. That makes a second credit crisis almost inevitable and perhaps a lot more menacing. The high debt-to-GDP ratios in Greece (166%), Italy (121%) and Ireland (109%) were already difficult to shrink when times were brighter (2008-11). The task is even harder now. Austerity does not help as it weighs down GDP and shrinks tax revenues. We previously demonstrated the maths for how manageable debt costs (at 4%) become unsustainable (at 6-7%). We postulated that the good intentions of the October plan to perpetuate an ‘orderly’ Greek default changed the rules of the CDS market and triggered the unintended consequence of a bank run on the Italian sovereign market. Meanwhile, social unrest at the peripheral could yet overwhelm efforts to make voluntary debt write-downs workable. We agree with the developing view that sustaining the euro bloc is tough. A break-up is a matter of time. When that happens, deposit flights from weak banks could ensue, precipitating further economic damage.

2.2 Growth stalling; environment vulnerable to shocks
We expect a difficult period ahead. Singapore will have its work cut out in 2012, navigating adverse conditions. Our regional economists’ global growth forecasts are 1% (base case) to -1% (worst case). Our Singapore economists have brought down their 2012 GDP growth forecast to 2.8%. The Ministry of Trade and Industry recently cut its own forecast to 1-3%, assuming a full-blown crisis can be avoided. MTI added the caveat that GDP could be lower if a full-fledged crisis erupts. The latest euro-zone PMIs have stayed below 50.


In Singapore, risks of steeper GDP cuts come from Services. Services (mainly financial services and tourism) have been resilient so far, but capital-market activities have stagnated and retrenchments are surfacing slowly. These are lead indicators. On tourism, SIA’s passenger load factors have contracted noticeably for the Europe sector. Singapore’s September tourism also slowed to +10% yoy from the 16-17% growth rates earlier in the year, albeit this could be seasonal. The tourism sector still looks healthy now because Asian tourists account for half of the pie. The main markets of Indonesia (+14% yoy), China (+39% yoy) and Malaysia (+13% yoy) are still healthy and hotels are almost full with RevPar (S$236) higher than 2008 highs (S$223). We think the tourism sector will muddle through but will be vulnerable if China suffers a hard landing. That is not our base case yet. If we manage to avoid that, hotel stocks such as CDL Hospitality Trust and Amara are attractive, having been de-rated like cyclicals.

2.3 Jobs and interest rates hold the key
We are more bearish on residential and office Property. We believe physical residential property prices can contract by 15% in 2012. Jobs and interest rates hold the key, particularly the health of the financial services and tourism sector. Our economists expect job growth of 60k-65k in 2012, half the levels of 2010 (116k). The other risk to property prices is interest rates. We tend to agree with a low SIBOR view but would be watchful for triggers that could cause US interest rates to spike. We think such events, if any, would include a loss of confidence in the dollar or US trade wars with China. In Singapore, property bad debts spiked during the Asian crisis but did not during GFC. The difference was interest rates. We highlight that low interest rates in the past three years have already pushed property prices up (to vulnerable levels) and compressed average rental yields to 3.0-3.2%. In the high-end residential segment, yields are as low as 1.5-2.0%, compared with average 3-year mortgages of 1.0-1.5%. Physical property prices are vulnerable when interest rates climb.

2.4 Property heading into a year of high inventory
Even if job growth does not fall off a cliff and interest rates stay low, our property analyst, Donald Chua, believes that 2012 will mark an influx of supply. The latest 3Q11 URA data casts a cloud over physical prices with inventory from completed and uncompleted units piling up by 5.2k units to 1999 levels (largest supply of uncompleted private units). Physical completions next year are set to hit 12k. Secondary-market transaction volumes (resales and subsales) had fallen 10-20% qoq, indicating weaker demand. These signs coincide with slowing GDP growth and a more stringent immigration policy after the 2011 General Elections. With physical prices now at record highs, a perfect storm might be brewing.

Office demand has moderated considerably in 2H11 as financial institutions deliberate on downsizing. Likewise, physical completions are expected to intensify in 2012 (1.8msf). Much, though, has been pre-committed. Consensus is now unanimously bearish on the sector.


2.5 New residential precinct in the old CBD
It is not all doom and gloom, though. Singapore developers are cashed-up and can take advantage of new opportunities. Even in a bear market, new opportunities will surface as Singapore continues its makeover. If 2005-10 was about the two casinos, the next 10 years could be about developing Singapore’s south and south-western belts. Temasek and Khazanah recently hired banks to arrange S$5bn of loans for the joint development of properties. These relate to parcels of land in Marina Bay and Rochor-Ophir. As the development of the south picks up with the Khazanah collaboration, we anticipate phased-out redevelopment to extend to the South-Western corridor of Singapore. The Keretapi Tanah Melayu Berhad (KTMB) railway station at Tanjong Pagar had been relocated to Woodlands in Jul 11. We anticipate redevelopment plans to be announced soon for the old station, which would be conserved as a national monument. More important than the redevelopment of the actual site, we expect the parcels of land which were formerly divided by the railway track along the Western corridor to be amalgamated, resulting in possibly higher usage and potential.

Longer term, the South-Western corridor (essentially the whole Pasir Panjang port area) would be fully transformed only when the leases for the port land at Tanjong Pagar, Keppel and Pulau Brani expire in 2027. One stock beneficiary could be Mapletree Commercial Trust. The Economic Strategies Committee (ESC) has proposed the development of a waterfront city worthy of international recognition in its place. Envisioned as an expansive and integrated waterfront complete with residential, hotel, lifestyle and tourism facilities, the corridor will eventually be an extension of the Downtown Core area. Singapore developers are fairly cash-rich and opportunities will come from winning these sites.

2.6 Focus on stocks with strong balance sheets and the businesses to ride the Asian decade
Beyond our near-term bearish view on the stock market, we think the focus ahead should be on stocks that: 1) have the balance sheets to ride out these challenges; and 2) have the businesses to cater to the upcoming Asian decade. We believe that businesses catering to the Asian or ASEAN consumer with some scale will stand out. We like the food & beverage and beer businesses of F&N, and retail stocks such as Dairy Farm, Parksons Retail Asia and Sheng Siong. We think these own sustainable businesses that will be attractive if stocks fall in a crisis. On a broader perspective on the Asian consumer, integrated palm-oil stocks like Wilmar and agriculture logistics stock, Olam, are also excellent consumer plays.

3. SECTOR VIEWS FOR 2012
3.1 Financials
We are Neutral on Financials. Banks are already reeling from revenue challenges from weak capital markets and poor trading outcomes. Rising costs are another bugbear. As markets crumble, credit costs can only go higher. Initial NPLs in 2012 are likely to come from manufacturers and exporters first, property NPLs are unlikely to surface in a big way yet until interest rates spike and unemployment climbs. There is already a tight-US$ liquidity situation as western banks pull out of Asia. Central banks are watchful that this does not transpire into something more dangerous. On the bright side, the retreat of European banks provides opportunities for Asian banks to fill their gap in facilitating trade. We rate DBS (growing corporate client traction) an Outperform. We rate OCBC and SGX Underperforms.

3.2 Property
We are Underweight on Property, ex-REITs. October home prices in Singapore might have remained at record highs but unsold stock had risen considerably qoq. China remains hawkish and will not allow property prices to run away. Singapore office leasing has slowed considerably and job growth is at risk in 2012, with notable weakness from financial institutions. The only bright spot is Singapore hotels. Our key Outperforms are UOL (attractive valuations), GLP (proxy for China consumption at more attractive valuations) and FNN (top-performing F&B division). Our key Underperforms are City Developments (old offices in Singapore, Europe hotels), Keppel Land (China exposure) and CMA (high capex needs, possible fund-raising).



3.3 REITs
We are Overweight on REITs. Our review of their capital structures shows that the key difference between now and 2008 is significantly lower short-term debt, at 8% of the total debt now vs. 38% in 2008. Asset leverage is not very different, but less-pressing short-term liabilities would reduce the likelihood of cash calls, in our view. Additionally, we expect more REITs to turn to portfolio rationalisation as a far-less painful alternative to recapitalisation. REITs which have embarked on this have built up cash buffers which would position them for opportunistic acquisitions and refinancing terms. Key Outperforms are CDLHT (better valuations, sustained visitor arrivals) and AREIT. Vulnerable stocks include KREIT, Suntec REIT, ART and FCOT due to their weaker credit metrics. Among the four, we are most negative on KREIT, whose aggregate leverage remains high at 42% even after its 17-for-20 rights issue to finance the acquisition of Ocean Financial Centre. About 20% of its debt is also due for refinancing in 2012.


3.4 Telecommunications
We are Overweight on Telcos, despite clouds cast by the recent results season and the Indian rupee’s steep fall. Overall, sector earnings are defensive and that is prized in a volatile and turbulent environment. Telcos have decent yields of 5%, backed by healthy FCFE yields. Gearing is also below threshold levels. Near-term drags on share prices would be the upcoming 4Q season, which could be seasonally weaker due to subsidies for the iPhone4S launched in Oct. Key Outperform is StarHub (stable dividend outlook, less competition from NGNBN in the residential segment). Least preferred stock is M1, as we feel it lacks re-rating catalysts even if downside can be supported by 5-6% yields.

3.5 Transport
We are Underweight on Transport. The outlook for SIA is uninspiring while the outlook for NOL is very poor. SIA has warned that advance passenger bookings, in particular to the US and Europe, have been poor. Its cargo business is also extremely weak. We expect NOL to post three consecutive years of losses. Containership operators have not materially reduced their capacity deployment to Europe while import demand to the US has been very weak. Asia-Europe rates continue to be a sore spot. Land-transport operators, while having more defensive revenue, are not entirely risk-free. SMRT has to battle stubbornly high costs, especially in staffing and energy. Perhaps the only bright spot in the sector is ComfortDelGro, whose earnings have been supported by overseas contributions.

3.4 Telecommunications
We are Overweight on Telcos, despite clouds cast by the recent results season and the Indian rupee’s steep fall. Overall, sector earnings are defensive and that is prized in a volatile and turbulent environment. Telcos have decent yields of 5%, backed by healthy FCFE yields. Gearing is also below threshold levels. Near-term drags on share prices would be the upcoming 4Q season, which could be seasonally weaker due to subsidies for the iPhone4S launched in Oct. Key Outperform is StarHub (stable dividend outlook, less competition from NGNBN in the residential segment). Least preferred stock is M1, as we feel it lacks re-rating catalysts even if downside can be supported by 5-6% yields.

3.5 Transport
We are Underweight on Transport. The outlook for SIA is uninspiring while the outlook for NOL is very poor. SIA has warned that advance passenger bookings, in particular to the US and Europe, have been poor. Its cargo business is also extremely weak. We expect NOL to post three consecutive years of losses. Containership operators have not materially reduced their capacity deployment to Europe while import demand to the US has been very weak. Asia-Europe rates continue to be a sore spot. Land-transport operators, while having more defensive revenue, are not entirely risk-free. SMRT has to battle stubbornly high costs, especially in staffing and energy. Perhaps the only bright spot in the sector is ComfortDelGro, whose earnings have been supported by overseas contributions.

3.4 Telecommunications
We are Overweight on Telcos, despite clouds cast by the recent results season and the Indian rupee’s steep fall. Overall, sector earnings are defensive and that is prized in a volatile and turbulent environment. Telcos have decent yields of 5%, backed by healthy FCFE yields. Gearing is also below threshold levels. Near-term drags on share prices would be the upcoming 4Q season, which could be seasonally weaker due to subsidies for the iPhone4S launched in Oct. Key Outperform is StarHub (stable dividend outlook, less competition from NGNBN in the residential segment). Least preferred stock is M1, as we feel it lacks re-rating catalysts even if downside can be supported by 5-6% yields.

3.5 Transport
We are Underweight on Transport. The outlook for SIA is uninspiring while the outlook for NOL is very poor. SIA has warned that advance passenger bookings, in particular to the US and Europe, have been poor. Its cargo business is also extremely weak. We expect NOL to post three consecutive years of losses. Containership operators have not materially reduced their capacity deployment to Europe while import demand to the US has been very weak. Asia-Europe rates continue to be a sore spot. Land-transport operators, while having more defensive revenue, are not entirely risk-free. SMRT has to battle stubbornly high costs, especially in staffing and energy. Perhaps the only bright spot in the sector is ComfortDelGro, whose earnings have been supported by overseas contributions.

3.6 Capital Goods
We are Underweight on Capital Goods, pessimistic on the 2012 order momentum. Drillers are taking longer to commit to new orders. More options are left unexercised. One more option has lapsed for KEP since Oct 11; two more will expire by end-2011. SMM has eight options outstanding but clients recently guided that their fleet expansion will take a pause. Overall, 80% (out of the 56) of the rigs due for delivery in 2013 are without contracts. Almost all of 2014 deliveries will be speculatively built without contracts. This suggests no shortage of supply. We expect competition to ratchet up as projects dwindle. Petrobras projects are unlikely to be very profitable in this environment. Our key Outperform is Sembcorp Industries (cheap, earnings resilience from Utilities). We would look to buy STX OSV when markets crumble. We remain bearish on Chinese shipbuilders though all have been de-rated. Our key Underperforms are SMM (small order book) and Ezra (high net gearing).

3.7 Commodities
We are Neutral on the sector, having upgraded it after its recent underperformance. In the crude palm oil space, we favour downstream producers and large, integrated companies as we believe the new Indonesian export tax structure will benefit Wilmar, Golden Agri and to a smaller extent, Indofood Agri. We do not see a sharp reversal of fortunes in the near term for Noble though it has been de-rated so sharply that it is difficult to envisage much downside from here. We think that balance-sheet strength is particularly important ahead, which is why apart from the difference in 3Q results, Olam looks better than Noble. Our key Outperforms are Olam (stable earnings growth) and Wilmar (Indo export tax structure, expansion into new products). Our top short is Mewah (Malaysian refiners are disadvantaged by the Indo tax structure).


4. EARNINGS RISKS AND VALUATIONS
4.1 Earnings downgrades have started, not yet fully done
We have been bearish since May; by now, so is everybody. Europe’s economy is slowing rapidly. The prospect of financial-market dislocations is mounting. The US stands at risk of being dragged into a recession by Europe while intermittent worries on China pop up. A property bust in China is possible if its export sector suddenly gives way. The consensus argument is that Asia is a lot healthier than Europe and the US, and Asia will come through alright. Although we are such a bear, we think this is realistic. As events unfold, the important questions for 2012 are: how much of a pinch on corporate profits has been built in and have stocks already factored in all the negatives? Over the whole of 2011, CIMB Singapore cut its CY11 and CY12 market earnings by 7% and 18% respectively. CY12 ROE forecasts have converged to 11.0%, levels that are only slightly higher than 4Q08’s. If recession drags out, we doubt that our earnings-downgrade cycle is done yet. Comparing the 1997 Asian Financial Crisis (AFC)/2008 GFC and now, earnings had fallen by a 45% CAGR over two years (AFC) and by a 6% CAGR over two years (GFC). Our estimates still imply growth ahead..


We keep asking ourselves what the difference is between now and 2008. Arguably, Singapore companies are more prepared in 2011. Banks have built up capital buffers and ducked OECD exposure. Property developers are more cashed-up; they also carry less inventory. REITs have diversified from short-term funding. These are all the reasons for our still-resilient earnings forecasts at this stage. Earnings risks are from: 1) offshore & marine players if we have a year of order lull; 2) commodity players and traders suffering disproportionate earnings swings when commodity prices fall; 3) shipping and airlines crashing to losses as demand dries up, corporate travel is restricted or if governments erect trade barriers. Overall, we think we are only halfway into an earnings-downgrade cycle.

4.2 How much of it is in the price?
The flaws in using 10-year valuation multiples are that the last 10 years included an extremely buoyant period (2007-08) inflated by a global debt binge. The world does not look like it can revisit those days. Hence, we exclude 2007-08 bull-market valuations when trying to gauge the right multiples. The Singapore market trades at 1.3x CY12 P/BV, 12.7x CY12 P/E and 11.2x CY13 P/E. Excluding 2007, its P/BV band is 1.0-1.8x. We are now slightly below mean. Excluding 2007 in our P/E range yet again, the FSSTI P/E band is 10-15x. Based on our current forecasts, CY12 P/E is at the mean (12.5x). Our P/E valuation guide is only useful if earnings are predictable; unfortunately, with contagion risks, earnings visibility is hazy. Our CY13 EPS forecast at this moment still looks fairly optimistic at +14%, particularly if there is a banking crisis.



Even though Singapore companies are less leveraged in this cycle than in 1998, the drag would still come from de-leveraging in both Europe and the US. We think that the extent of earnings contraction could be in the range of the 2008/09 GFC and valuation multiples could re-visit 2009 lows or slightly lower. In 2008/09, FSSTI earnings contracted 6% each year. Assuming a similar scope of earnings decline (-6%), we attempt to gauge the FSSTI’s bottom in this cycle. On a P/E basis, the FSSTI tends to bottom at about 10x P/E. It typically falls below 12x when there is a major external shock (like now). On a P/BV basis, the FSSTI tends to bottom at 1.0-1.1x.


We are not optimistic on the world getting out of its current mess painlessly. 2012 is about trying to gauge the degree of pain that will come when defaults, de-gearing and de-rating hit. At this moment, the most likely trigger would be bank runs, sovereign defaults in Europe. The trigger is likely to accentuate current dollar strength and depress commodity prices further. We believe the market will observe if Singapore and Asia can hold their own as Europe collapses. If there is resilience in Asia, we reckon the FSSTI could trough at 12x P/E (on reduced earnings), 1.1x P/BV. Such levels allude to a bottom of 2,280 for the FSSTI. We would be patient and wait for FSSTI to approach 2,280 before going long.

If the US banking sector gets swept away by banking defaults in Europe and the US Fed attempts to launch QE3, we think dollar strength could end very abruptly. Commodity prices would head higher even as global economic weakness accentuates. The Fed might lose its ability to dictate a low-interest-rate environment. Social unrest could intensify in this chain of events. In such a scenario, we reckon the FSSTI could slip further to 10-11x P/E and 1.0x P/BV. Such levels imply an index of 2,040, before it finds a bottom.


5. RECOMMENDATIONS
5.1 Maintain Underweight, end-CY12 index target of 2,680
We maintain our end-CY12 FSSTI target of 2,680 (1.3x P/BV). We expect markets to head lower before any chances of a recovery. Our Underweight position on Singapore is unchanged. We do not have faith on any ‘big bazooka’ solution for Europe. The only chance that the ECB will act like the Fed is if Germany wrings exacting terms out of the peripheral, terms that will prove untenable for the peripheral ahead. We believe Singapore stocks will get dragged down as the euro zone breaks up and a banking crisis starts.

We are bearish now but we are not perma-bears. Every stock has a price, we will reconsider our view when those levels are hit. We highlight entry levels for individual stocks below. For long-only investors, our top picks in Singapore are AREIT, CDLHT, ComfortDelGro, DBS, GLP, Olam, SCI, StarHub, Genting Hong Kong and Wilmar.


TOP PICKS
Ascendas REIT (TP S$2.13)
• Despite its share-price resilience, AREIT still trades at 1.2x CY12 P/BV, below its 5-year average of 1.4x P/BV, above its floor of 0.6x P/BV during GFC.
• We like AREIT for its resilient and quality portfolio, CPI-pegged leases to mitigate cost pressures and prudent capital management.
• Acquisitions and developments completed in the past quarters and 4Q12 should cushion any downside in upcoming quarters.

CDL Hospitality Trust (TP S$1.81)
• CDL is our top pick among REITs. It trades at 1x CY12 P/BV, below its 5-year average of 1.3x P/BV, above its floor of 0.4x P/BV in GFC.
• Outstanding qualities include its strong balance sheet, conservative asset valuation and highly-disciplined management. Recent guidance suggests management is still able to nudge up corporate rates for 2012.
• We anticipate increased contributions from Orchard Hotel after its refurbishment this year. Continued strong visitor arrivals should support REVPAR.

ComfortDelGro (TP S$1.59)
• ComfortDelGro is our top pick in the Transport sector. Trading at 12x CY12 P/E vs. its 11.7x trough, downside should be limited.
• ComfortDelGro offers earnings defensiveness, supported by ridership growth. Contributions from overseas businesses offer additional buffer.
• Better cost management can be a positive catalyst for the stock, be it from cost control or falling energy prices.

DBS Group (TP S$14.00)
• DBS is our conviction pick among Financials. It trades at 1x CY12 P/BV, 10x CY12 P/E. DBS used to floor at 0.7x P/BV but we think it is different today.
• The new DBS has leveraged its franchise strengths to develop its trade finance, cash management, Global Trade Services. All these build more stable non-interest income, worthy of higher valuation multiples.
• After the 2012 recession, earnings upside lies in stronger customer traction, wealth-management contributions and expanded margins as interest rates rise.

Genting Hong Kong (TP S$0.52)
• Genting HK trades at 1x CY12 P/BV and 13x CY12 P/E. It floored at 0.3x P/BV during GFC but we think the company is fundamentally stronger today.
• Genting HK is well-positioned to ride the gaming sector uptrend as more amenities are rolled out at RWM. Even its cruise segment has turned around.
• Earnings upside lies in rising gambling volume at RWM, stronger cruise takings and expanded EBITDA margins. Both core operations and associates’ contributions can improve.

Global Logistics Property (TP S$2.24)
• GLP trades at a 20% discount to our RNAV, tighter than the 25-40% discounts for the other big caps.
• We believe GLP’s valuation premium can be justified by its scale in its core markets, the scalability of its business and a more competitive capital structure for growth.
• We see multiple catalysts from the accretive deployment of capital, potential monetisation of its Japanese assets and higher rents in China

Olam (TP S$3.17)
• Olam is our top Commodities pick. The stock trades at 11x CY12 P/E. During the 2008-09 downturn, it averaged 15x P/E and touched a floor of 8x.
• Olam stands out for its defensive portfolio of edibles, anchoring earnings. There have been no quarterly earnings shocks, unlike peers. Gearing has also been lowered.
• Earnings growth continues to be buoyed by higher volumes and margins, and potential M&As.

Sembcorp Industries (TP S$4.65)
• Sembcorp Industries (SCI) trades at 9x CY13 P/E. It troughed at about 7x P/E during GFC.
• Utilities today are stronger than the previous crisis, backed by: 1) stronger power prices in Singapore; 2) better asset utilisation of its international assets; and 3) the consolidation of Cascal. We expect earnings growth in Utilities to cushion a deterioration in Marine earnings as a result of an order slowdown.
• Catalysts include stronger-than-expected power prices and M&As.

. StarHub (TP S$3.31)
• StarHub is our top pick in the telco sector. It trades at 15.2x CY12 P/E and 7.8x CY12 EV/EBITDA. Floor valuation was 10x P/E.
• StarHub is liked for its lower risks, pure domestic operation (shielding it from currency fluctuations and foreign regulations) and highest yields of close to 6% among Singapore telcos.
• Catalysts are its commitment to a fixed dividend policy for 2012, stable businesses and reduced competition in the residential segment.

Wilmar (TP S$5.60)
• Wilmar trades at a forward P/E of 12x, or 25% below its historical 5-year average of 16x. The stock fell to 7x P/E during GFC on earnings concerns, which proved unfounded as it posted its best earnings ever in FY09 despite lower commodity prices.
• It has since added sugar, rice and flour processing and moved up the value chain in palm processing. Indonesia’s new export tax is expected to boost its palm processing margins in FY12.
• Catalysts are stronger palm-refining margins in Indonesia and M&A possibilities.




Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Commodities Outlook 2012: Beaten-down valuations (CIMB)

Beaten-down valuations
We recently upgraded the sector to Neutral as risks have been reflected in beaten-down valuations, we reckon. CPO-related stocks may be re-rated in the short term on weather concerns. Among supply-chain managers, volume growth remains important

Wilmar is our top pick as it stands to benefit from Indonesia’s new export tax and weaker CPO prices. Purer CPO stocks may enjoy a short-term rally as La Nina may interrupt harvests and the supply chain up until 1Q12. Among commodity supply-chain managers, we prefer Olam to Noble for its defensive portfolio.

Upper hand for downstream players in Indonesia
Average CPO prices could decline 20% to US$880/tonne in 2012 because of slower demand growth. This would be milder than in 2008 due to the slower growth of palm supplies in 2012, rising disposable income in Asia, fears of crop damage by La Nina and ample liquidity in the financial system. In view of this and the new palm-oil tax system in Indonesia, we believe Indonesian palm-oil suppliers with downstream businesses (Wilmar, Golden Agri and Indofood Agri) will have an upper hand over their regional peers in 2012.

Track record matters
Among midstream players, Olam is our top pick while Mewah is our least preferred. Olam stands out for its defensive portfolio which comprises mainly edibles, as well as a good record of navigating the 2008-09 downturn. We are not quite ready to turn positive on Noble as we sense macroeconomic volatility and management changes. Mewah continues to struggle with margins and faces heightened risks from Indonesia’s new export tax structure.

Selective stock-picking
We advocate buying into specific companies. Olam, Wilmar, Golden Agri and Indofood Agri are our top picks. We also like Sakari Resources as valuations are attractive against earnings growth prospects.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Capital Goods Outlook 2012: Entering a slow 2012 (CIMB)

Entering a slow 2012
More options have expired recently, as drillers’ plates are full with prevailing newbuild programmes. We expect little interest in Singapore rig builders, at least until 2H12 when distress assets start to stream into the market, potentially marking the bottom of the cycle.

We believe the exercise of rig options is unlikely for the rest of 2011. Drillers are in no hurry to place new orders as they focus on the execution of existing newbuild programmes. Maintain Underweight on the sector. We prefer SCI for its stable Utilities and proxy for O&M exposure.

More options have lapsed
One more option has lapsed for KEP since its 3Q11 earnings and we believe this is from Discovery Offshore. KEP is left with two options, expiring at end-2011. SMM has eight options outstanding, including two from Noble Corp, which had commented during its 3Q11 earnings release that it is taking a pause in fleet expansion.

80% of 2013 deliveries without contracts
Forty five out of the 56 rigs for delivery in 2013 are still without contracts and they are mostly jack-up rigs. Almost all of 2014 deliveries will be speculatively built without contracts. Including 180 drillings rigs with contracts expiring in 2013/14 which will be competing for new contracts, we believe drillers’ plates are full and their expansion plans may moderate.

Petrobras priced in
We have included S$4.3bn of Petrobras orders for KEP and SMM each in 2012. We believe the market will be disappointed if Singapore yards fail to clinch rig orders from the Brazilian oil major, although the orders have been labelled as ‘wild cards’.

Not rock-bottom yet
We would be buyers if share prices for Singapore rig builders fall another 20-30% to reach their 12-month average recession valuations in 2008-09.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Transport Outlook 2012: The three compressions (CIMB)

The three compressions
Aviation and shipping have never looked so alike: yield compression from oversupply, margin c0mpression from persistently high oil prices, and profit compression from both of the above. Nevertheless, investors may have buying opportunities in the ensuing selldown.

On the back of earnings contractions for the transport sector, we keep our UNDERWEIGHT. We expect the outlook to look better from 2H12, when we think global inventory destocking could give way to inventory restocking and drive air and sea cargo volumes up.

Aviation under pressure
The aviation sector is feeling the heat of weaker long-haul passenger travel demand from Europe and the US. While short-haul travel demand is holding up much better, it is not enough to buoy SIA’s earnings, which have been under pressure over the past few quarters from falling yield and stubbornly high jet fuel prices. Apart from passenger travel demand weakness, cargo demand has also been under pressure, as market share has been lost to sea cargo. Meanwhile, Tiger Airways is battling its own problems of an underutilised fleet in Australia, excess capacity in Singapore, and an inability (so far) to tie up with potential partners in ASEAN.

Shipping at risk
We expect NOL and STXPO to lose money at least until 2013, as the shipping oversupply is acute. While expecting to take delivery of new ships from 2012-14, NOL is not be immune to sharply lower rates as a consequence of container shipping overcapacity. Separately, STXPO has been losing money persistently in tanker and container shipping; even bulk shipping is not any better.

Land transport
Land transport offers relative earnings defensiveness on the back of resilient ridership growth. We remain watchful of operating costs in 2012, as higher train and bus runs and new stations will lift opex. Between CD and SMRT, we prefer CD for its superior cost management and earnings contributions from offshore initiatives.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Telco Outlook 2012: All eyes on fibre (CIMB)

All eyes on fibre
Fibre will come into greater focus in 2012 as coverage widens but we do not expect accelerated take-up. Telcos will also have to grapple with the ongoing shift to data, attempts to monetise this, and margin dilution. That said, competition should be fairly benign next year.

Balance sheets and cash flows of all three telcos remain strong and lend support to dividends. Key risks are a rise in competition, the entry of more players in broadband, margin pressure and voice/SMS cannibalisation. Maintain OVERWEIGHT with StarHub as our top pick.

Voice/SMS substitution trend remains
Data, especially small-screen, remains a source of growth and has been cannibalising voice, going by falling postpaid MOUs save those of M1. This is driven by deeper penetration of smartphones and a growing number of over-the-top applications available.

The challenge is to monetise surging data traffic. The dominant mode remains flat-rate pricing but attempts to move to a tiered structure through LTE could be pushed back by consumers who are spoilt with large data bundles.

NGNBN coverage widens
OpenNet is mandated to pass 95% of the premises by mid-2012. With more pervasive coverage, we believe telcos will compete more aggressively to capture subscribers (7% of fixed broadband base currently). That said, we do not expect accelerated take-up as the need for high speeds is not high at this juncture. Moreover, it would take some time for installation constraints to be fully resolved and for more premises to be connected.

We also expect more players to emerge especially at the RSP layer.

Dividend attraction
Telcos offer a safe refuge with yields tracking 5%. Telcos have gradually been increasing their payouts or declaring special DPS over the past few years. We think 2012 could be ripe for capital management as capex should peak in 2011 while gearing is fairly low. The wildcard, as ever, is the economic environment.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Yongnam Outlook 2012: Solid as steel (CIMB)

Yongnam
Current S$0.24
Target S$0.42

Solid as steel
Yongnam is looking at another record year, with the help of robust revenue and margins. More impressive is its consistency in securing new orders, churning better profitability from its regimentally tight control of working capital.

Our estimates reflect solid control of operating expenses and margins. Our TP stays at 8x CY12 P/E. Order book has surpassed market cap by two-fold, with more sizeable projects to be secured. Maintain Outperform.

Strong earnings visibility
We believe there will be more records set for its earnings, on the back of its strong Specialist Civil Engineering (SCE) division. Strong contributions from various projects (Singapore and HK) will form the backbone of the SCE segment, which accounts for 55% of revenue. GP margins should hover around 30% again (not seen in a decade) as a result of better pricing and subdued costs.

Earnings visibility remains solid, backed by an order book of S$480m. Two recently-announced structural steelwork projects worth S$23.7m altogether (Singapore Sports Hub and Asia Square Tower 2) will start contributing with completion only in 1H13, heightening its earnings visibility.

Magic in working capital
Margins are now more predictable and have been strong in the last 4-5 quarters. Its ability to churn out profits consistently with positive operating cash flow has been often overlooked.

Large pipeline of projects
We are convinced that there is a healthy pipeline of projects in Singapore as well as the region, where YNH stands to reap major benefits. A strong track record and proven execution should set it apart from peers in capitalising on increased opportunities in the region.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Yangzijiang Outlook 2012: Neither here nor there (CIMB)

Yangzijiang
Current S$0.88
Target S$0.72

Neither here nor there
Although YZJ is cheap against the Singapore O&M stocks, there are no catalysts for shipbuilding. Its micro-financing business and large exposure to financial assets could also remain overhangs.

Maintain Underperform and target price, still based on 4x CY13 P/E. We believe YZJ will be out of investors’ watch list for a while given a bleak order outlook for shipbuilding and its diluted earnings quality.

Non-shipbuilding earnings to stay
We estimate that non-operating income (interest income and subsidies) could dominate 45% of YZJ’s earnings in FY12. In 3Q11, such income contributed 43%. Management guided that interest income should come up to Rmb1.2bn p.a. on the back of Rmb10.4bn investment trusts (10-15% returns). These investments are likely to remain at Rmb10bn levels until FY13, for business diversification. We continue to see risks from a volatile market, as the ratio of share collateral had dropped qoq to 2x from 2.66x.

Too diversified
YZJ intends to develop its ship-demolition and offshore/ large-scale infrastructure businesses from zero to 20% of group revenue in three years’ time, while shipbuilding’s portion could shrink to 60%. Ship demolition is a counter-cyclical business but could fetch much lower margins. YZJ also plans to venture into property development with local Chinese governments to cushion the doomsday of shipbuilding. This could require higher capex. We believe investors are better off investing in pure shipbuilders, banks or property developers than a hybrid business like YZJ’s.

50% to trough
YZJ troughed at 2.2x P/E in the last recession, despite a strong order backlog secured before 2008. Given a deteriorating order book and weak outlook, we believe it could re-test its trough.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

TigerAirways Outlook 2012: Still in a nosedive (CIMB)

TigerAirways
Current S$0.64
Target S$0.50

Still in a nosedive
2011 was a nightmare. 2012 may not be smoother-sailing. We expect losses to continue on an idle fleet in Australia. Expect flat yields, lacklustre demand, high fuel costs and excess capacity next year.

It is still too early to call for a turnaround. Maintain Underperform and TP at 8x CY13 EPS, the industry’s 4-year historical forward average.

Expect further losses
Tiger suffered its worst quarter yet in 1QFY12 with a S$50m loss. Further losses should be inevitable. Despite entering its strongest quarter, we continue to see flat yields and weak load factors. In addition, while restrictions in Australia are gradually being lifted, Tiger needs to resume full operations just to break even. Compounding its woes, Tiger will be receiving eight A320s in FY13. This could exacerbate its excess capacity. Aircraft delivery deferments are still likely.

A slither of silver lining
To absorb its additional capacity, Tiger would have to secure new bases elsewhere. Tiger’s 33% stake acquisition of Airlines Mandala is in its final stages. Its domestic partnership with SEAIR in the Philippines has been cleared by regulators, though the verdict on its previously proposed 32.5% stake acquisition of SEAIR is still uncertain. On the flip side, its partnership with Thai Airways is in limbo and chances of success appear slim.

Not time to bottom fish
Investors looking to bottom fish will have to be patient. Valuations are still steep at 1.83x P/BV, against losses. Razor-thin margins render Tiger vulnerable to a tough environment next year. In light of volatile markets, it is no time to make bets on an airline still in a nosedive.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Suntec REIT Outlook 2012: Execution risks from AEI (CIMB)

Suntec REIT
Current S$1.14
Target S$1.18

Execution risks from AEI
Suntec REIT has higher aggregate leverage and exposure to a slowing office sector. While we deem management’s ROI target for Suntec City Mall’s AEI achievable, there are execution and leasing risks from fairly long-drawn AEI.

We expect DPU to drop next year on a weaker office market, the tapering off of ORQ income support and AEI disruptions at Suntec City Mall. The impact should be softened by payouts from divestment proceeds. Maintain Underperform and DDM target price (disc rate: 9.1%).

Slowing office market
We expect office rentals and occupancy to come under pressure next year from new office supply against a slowing economy. With underlying rentals at One Raffles Quay expected to be below those offered by its income support, we see a drop-off when income support ends next year.

AEI at Suntec City Mall
Details on tenant mix and disruptions are still sketchy. Management wants a 10% ROI from the AEI, stemming from a 14% uplift in retail NLA and 25% increase in rents. We deem this achievable when the asset stabilises but remain wary of execution and leasing risks from fairly long-drawn AEI, at a time when the economy is shaky.

Fairly weak credit metrics
With asset leverage at 41% and considerable office headwinds, Suntec is a potential candidate for cash calls. The near-term impetus may not be that strong, with minimal refinancing needs and development capex for Suntec City Mall likely to come from divestment proceeds from Chijmes. With a larger free float, it may also be more difficult for Suntec REIT to seek approval for equity fund-raising. Overall, we believe cash calls could be averted until the REIT is ready to acquire Marina Bay Financial Centre Phase 2.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

STX OSV Outlook 2012: Definitely a mismatch (CIMB)

STX OSV
Current S$1.14
Target S$1.41

Definitely a mismatch
STX OSV is facing the prospect of an uptick in OSV orders next year, spurred by a raft of rig orders this year. Its new Brazilian yard should enable it to tap Petrobras’s E&P ambitions, bolstering earnings.

We maintain our TP at 9x CY13 P/E, a 10% discount to targets for rigbuilders. EPS estimates and Outperform are unchanged. We see catalysts from
stronger-than-expected orders and continued good project execution.

Meaningful uptick in 2012
We expect a more meaningful uptick for the OSV sector in 2012. Our view is reinforced by positive readings for utilisation and day rates. In addition, an influx of new rigs ordered in 2011 could induce demand for more high-end OSVs in 2012. For example, Farstad has been the first mover in ordering AHTS and industry watchers expect its competitors to follow. Norwegian government support for the country’s export industry should also assuage fears about the implications of credit tightening.

Orders from Brazil to flow
With higher visibility for the development schedule of its new yard, STX OSV could start quoting customers. Its existing yard is fully booked until 2013. Recall that it has 50% of the market for high-end OSVs in Brazil.

Cheap for a world-class yard
STX OSV is a world-class yard trading at 7x CY13 P/E. Considering this is 40% less than current valuations for rigbuilders, we see a valuation-competency mismatch and believe the discount should narrow.




Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Starhill Global REIT Outlook 2012: Stability amid instability (CIMB)

Starhill Global REIT
Current S$0.58
Target S$0.68

Stability amid instability
At 0.7x P/BV, Starhill remains one of the cheapest retail S-REITs under our coverage. We see Singapore’s growing importance as a gateway city to tap rising affluence in the region and expect Starhill’s local properties to be beneficiaries.

Despite some disruptions from AEI at Wisma Atria, we expect earnings to be anchored by Starhill’s master leases and long leases. Maintain Outperform and DDM-based target price (discount rate: 8.8%).

Stability through master and long leases
We expect stability with more than 40% of its revenue to be anchored by master leases and long leases. While there could be more disruptions at Wisma Atria early next year, we expect earnings weakness to be buffered by full-quarter rental step-up for David Jones and AEI contributions from Starhill Gallery.

Orchard Road attractively positioned
With growth in advanced economies in second gear and Singapore’s growing importance as a gateway city to tap rising affluence in the region, we believe more new-to-market brands could be drawn to Singapore’s Orchard Road. We see rental support from limited new retail supply on Orchard Road over the next two years. Starhill’s local properties, Wisma Atria and Ngee Ann City, are poised to benefit. Particularly, AEI at Wisma Atria has been well-received with good reversions for pre-committed rents.

Attractive valuations
At 0.7x P/BV and forward yields of 7%, Starhill remains the cheapest retail S-REIT under our coverage. We continue to like its stability from exposure to master leases, balance-sheet strength (asset leverage at 32%) and limited debt maturity till 2013. The tough macro environment could also throw up opportunities for accretive acquisitions, in our opinion.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

SIA Outlook 2012 Outlook 2012: Buckle your seatbelts (CIMB)

Singapore Airlines
Current S$10.40
Target S$11.00

Buckle your seatbelts
We are cautious on SIA given weakening long-haul travel demand, which will naturally lead to lower yields. SIA believes that demand weakness will be “protracted”, while fuel prices remain stubbornly high. Scoot is a longer-term project that may not yield immediately.

SIA is near the bottom of its valuation range, but we see no share-price catalysts in the near future. Our 1x P/BV target is slightly below its 10-year average of 1.1x. Hence, we remain NEUTRAL.

Poor near-term outlook
The outlook for SIA is poor. We still expect SIA to be profitable for all our forecast years, albeit at very low levels. SIA has warned that advance passenger bookings, in particular to the US and Europe, are showing signs of weakness, and hence yields are coming under pressure. The cargo business is also extremely weak. SIA expects the present downcycle to be protracted, while fuel prices have so far remained elevated.

Fortunately for the SIA Group, SilkAir is still profitable as short-haul Southeast Asian sectors are still seeing robust demand, and SIA Engineering is also expected to remain profitable. While SIA’s S$4bn net cash may keep the group safe, risks to earnings have prompted SIA to halve its recent interim
dividend to 10 Scts.

Scoot is a longer-term project
The recent launch of long-haul LCC Scoot is an interesting project, and we are confident that Scoot can be profitable and successful. However, contributions will be very small in the initial years.

Few benefits from China
SIA has fallen behind Cathay Pacific in the post-crisis period, because it has not been able to tap China’s travel boom with its geographic location and because it had failed to gain a stake in China Eastern a few years ago. SIA has still not restored its pre-crisis passenger and cargo capacity, whereas Cathay has comfortably exceeded pre-crisis capacity. In addition, SIA is surrounded by aggressive LCCs, whereas Cathay’s competitive environment is still benign. The reality is that SIA is no longer the preferred airline exposure that global/regional investors seek




Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Noble Group Outlook 2012: Not quite out of the rut (CIMB)

Noble Group
Current S$1.10
Target S$0.99

Not quite out of the rut
The worst may be over for Noble with 3Q11 losses likely one-off. Nevertheless, it is too early to turn bullish as macroeconomic headwinds intensify. Changes to senior management add to uncertainties.

We retain our caution on Noble, believing that consensus estimates remain too bullish. We maintain our EPS and TP, based on 7x CY13 P/E, its average during the 2008-09 downturn.

Worst may be over…
Noble’s 3Q11 shock losses could be a one-off event and we expect the resumption of profitability in 4Q11. The bulk of inventory write-downs had been made in 3Q11. Commodity prices have recovered slightly, supporting our view that margins should normalise.

…but uncertainties remain
We are not quite ready to turn bullish on the stock despite its beaten-down valuations, given persistent macroeconomic headwinds from Europe’s unresolved debt issues. Changes to senior management fuel further questions over strategy and leadership, which are all the more crucial in navigating today’s challenges.

More downside than upside
We see risks to consensus estimates. Our FY11-13 EPS are 6-11% below consensus. We maintain our Underperform rating, anticipating de-rating catalysts from deepening macroeconomic woes and earnings downgrades by the Street.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

NOL Outlook 2012: Watch out for 2H12 (CIMB)

Neptune Orient Lines
Current S$1.05
Target S$0.87

Watch out for 2H12
The container shipping sector is enduring extremely tough times, with both Asia-Europe and Transpacific spot rates at deep loss-making levels, which is expected to have serious ramifications at the point of contract renewals.

We see consensus earnings downside for NOL in the next 6-9 months, hence maintain UNDERPERFORM. Our TP remains based on 0.75x P/BV, one standard deviation below mean. We are keeping our eyes on a possible 2H12 demand recovery.

Losses to worsen
NOL has been booking progressively higher losses over the past three quarter. These losses should reach a crescendo in 1Q/2Q12, in our opinion, because the ongoing winter lull is being made worse by cautious inventory-buying by US and European shippers. With global stock levels rising and PMI indices falling, the container shipping sector will have to endure 6-9 months of inventory destocking. Sometime in 2H12, we suspect global inventory restocking will take place, and if the industry has withdrawn enough capacity by then, we may see a sharp recovery in spot rates.

Initial newbuildings are expensively priced
NOL is expected to return some 150,000 teus of chartered vessels to their owners from 2012-13, replacing them with newbuildings that will be cheaper to operate. This is because the charters were contracted at peak rates in 2006-07 and were delivered in the depth of the crisis in 2008-09. While we believe NOL’s long-term structural costs are on the way down, the initial newbuilding deliveries targeted for 2012 were also contracted before the crisis and are not cheap. For instance, the 10 10,000 teu newbuildings being delivered in 2012 have an average price of US$131.8m as eight were ordered in 2007 (average price of US$136.6m) with two ordered in 2010 (US$113m each). By comparison, the 14,000 teu newbuildings ordered by NOL this year cost only US$130m each. Also, the eight 10,000 teu newbuildings ordered by CSCL recently may be priced at only US$94.3m each. As a result, NOL’s 2012 newbuilding deliveries may not deliver as big a structural cost impact as hoped for.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Midas Outlook 2012 : Investors have taken the last train out; we stay put (CIMB)

Midas Holdings
Current S$0.34
Target S$0.36
Investors have taken the last train out; we stay put
We expect another 1-2 painful quarters, until railway development recommences. We also believe a cash-strapped Railway Ministry in China will be the industry’s main growth obstacle.

We remain Neutral as we believe the negatives have been priced in. Our TP is based on 8x CY13 P/E, industrial peers’ 5-year forward average.

Recurring pain
Midas’s 3Q pain could be blamed on slower train deliveries and higher operating/finance costs following its capacity expansion. In the aftermath of two railway accidents, the Chinese government had halted railway development. This led to the slower delivery of existing contracts and growing inventories in the industry value chain. Further, a cash-strapped Ministry of Railway (MoR) started to withhold payment to its major suppliers. As a result, Midas’s key clients, CSR and China CNR, delayed payment to their vendors too. As a result, Midas’s collection days grew to 311 in 3Q. It had to finance its working capital with short-term financing. We do not see any quick solutions in the near term.

The real issue
Although the MoR recently repaid CSR and CNR Rmb23bn in arrears, it is doubtful whether it still has the ability to fund development projects to meet targets spelt out in China’s 12th five-year plan. The market apparently does not believe so, judging from the escalating yields on the MoR’s recently issued corporate bonds. In response to mounting debt concerns, China’s new Railway Minister Sheng Guangzu plans to reduce the country’s railway investments by 30%. This could impede growth in the entire railway industry.

All priced in
As we believe Midas’s 0.7x P/BV valuations have priced in the negatives, we maintain our Neutral rating.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Mapletree Logistics Trust Outlook 2012: Staying robust (CIMB)

Mapletree Logistics Trust
Current S$0.84
Target S$0.95

Staying robust
We anticipate resilient yields, underpinned by a long weighted average lease to expiry of six years and high occupancy. Moderate growth should come from active asset enhancement, redevelopment and acquisitions.

We have already assumed S$500m worth of asset enhancement and acquisitions for 2012 and anticipate catalysts from redevelopment announcements. Maintain Outperform and DDM-based target price (discount rate 9.0%).

Stronger occupancy and rents
We expect resilient occupancy, given MLT’s 97+% consistency in each quarter of the last downturn. The conversion of three single-user assets to multi-tenanted buildings in the last quarter also did not hurt occupancy. On the contrary, rents in the buildings converted were renewed at higher rates.

Active capital management
In the same period, management rolled forward a S$281m yen loan from 2012 to 2018, to lower debt maturing in 2012 from 31% to 14% of total borrowings. Portfolio borrowing rate was unchanged at 2.2% even after the extension. The reduction of debt maturing in 2012 should help to address refinancing worries, given fairly high asset leverage of 41%.

Portfolio stable
Stability continues to characterize MLT’s portfolio, anchored by its long WALE of six years. While looking at acquisitions, management will at the same time try to extract higher yields through redevelopment. It has received approval for the redevelopment of 21/23 Benoi Sector which will add 70k sq m to its Singapore portfolio.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Mapletree Industrial Trust Outlook 2012 : Year of harvest (CIMB)

Mapletree Industrial Trust
Current S$1.06
Target S$1.24

Year of harvest
The lifting of rental caps for MINT’s flatted factories should start to make an impact next year. Leasing and organic growth potential remains strong given an under-rented portfolio and the expiry of close to one-third of its leases in FY13.

We continue to like this Singapore-centric industrial REIT for its large tenant base and centrally located assets. Maintain Outperform and DDM-based target price (discount rate: 8.6%).

Prefer industrial to office
Industrial REITs are favoured over office REITs, particularly in an economic downturn. Net new demand for industrial space had increased steadily from 2002 through the major crises of the dot.com bust (2001-2), SARs (2003) and global financial crisis (2009). In contrast, demand for its retail and office peers shrank sharply. Industrial rentals and values are also more stable.

Expect continued resilience
Leasing enquiries for MINT’s properties in the last quarter were strong while arrears (typically a sign of distress among tenants) were still healthy. While there has been a slowdown in enquiries from the electronics industry given weakness in the sector, this slowdown is not new. Stronger demand from biomed and precision engineering compensates for this.

To enhance its portfolio resilience and visibility, management may introduce packages with longer lease tenures and rental step-up.

Asset leverage within comfort zone
DPU should continue to benefit from low all-in funding costs of 2.2%. While asset leverage is fairly high at 39%, this is within management’s comfort level of 45% (given a stable portfolio) with FY12 maturing debt well-supported by existing lines of credit.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Mapletree Commercial Trust Outlook 2012: Stable, with growth to boot (CIMB)

Mapletree Commercial Trust
Current S$0.86
Target S$0.94

Stable, with growth to boot
We expect positive rental reversions at under-rented VivoCity next year, particularly with footfall and retail sales set to benefit from the opening of the MRT Circle Line extension. Growth should be augmented by ARC coming on stream.

With growth underpinned by positive rental reversions at VivoCity and ARC coming on stream, we remain positive on MCT. Maintain Outperform and DDM-based target price (discount rate: 8.6%).

Growth underpinned by VivoCity
Positive rental reversions at its largest asset, VivoCity, are expected to feature prominently in FY12. With the mall still substantially under-rented (estimated passing rents of S$10.10psf vs. peers’ S$11-14psf), rental reversions should remain positive next year, particularly with footfall and retail sales expected to benefit from the opening of the MRT Circle Line extension. YTD, management has renewed almost all the retail leases due in FY12 at good reversions of 20% with more contributions expected to flow in after the refurbishment of some units.

Boost from ARC
Over 50% (by NLA) of Alexandra Retail Centre (ARC) has been pre-committed, up from over 33% last quarter. ARC is on schedule to open by end-2011. With a good office catchment and limited retail offerings in the neighbourhood, we expect MCT to lease out the remaining space with ease. MCT aims to position ARC as a convenience mall with more F&B and service-related tenants.

Mapletree Business City in the pipeline
Still sensing good growth potential in its portfolio, management is not chasing an injection of Mapletree Business City in the next six months. This puts to rest any concerns about near-term cash calls, given asset leverage of 38.5%. Pre-commitments have since climbed to 84-5% with asking rents still stable.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

K-REIT Asia Outlook 2012: Not entirely unscathed (CIMB)

K-REIT Asia
Current S$0.87
Target S$0.92

Not entirely unscathed
While K-REIT is nowhere near breaching its loan covenants, we see the highest risk of a cash call with aggregate leverage at 42% after its acquisition of OFC, potentially aggravated by risks of office asset devaluation.

We expect DPU to drop next year as ORQ income support tapers off, especially in light of slower office leasing. We adjust our DPU estimates and DDM-based target price (discount rate: 8.2%). Maintain Underperform.

Slowing office market
We expect office rentals and occupancy to succumb to pressure next year from upcoming office supply even as the economy slows. With underlying rentals at One Raffles Quay arguably below those offered by its income support, we expect a drop-off when income support ends next year.

OFC acquisition approved by minority shareholders
Its acquisition of Ocean Financial Centre (OFC) has been approved by unit-holders. We have adjusted our estimates to factor in higher front-loading of income support for the asset vs. our previous expectation, as per its latest circular. We remain worried about leasing risks for the remaining 20% vacant space given a weakening office outlook.

Not entirely unscathed
While K-REIT is nowhere near breaching its loan covenants, we foresee the highest risk of a cash call with its aggregate leverage at a fairly high 42% after its acquisition of OFC. What could make things worse is office asset devaluation. We expect another cash call when Marina Bay Financial Centre Phase 2 is due for injection (likely in late 2012), though the impact should not be as bad because of an enlarged unit base after its recent 17-for-20 rights issue.



Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

Keppel Corporation Outlook 2012: Fully booked (CIMB)

Keppel Corporation
Current S$9.07
Target S$8.90

Fully booked
A strong order momentum this year could possibly compensate for any order drought in 2012. However, overall negative sentiment could still cloud the stock and KEP could, at best, perform in line with the market.

We keep our Neutral rating as we believe risks could be limited by its strong order book and better chance of winning Petrobras semi-sub orders. Our SOP target price is intact.

Yard space filled up till 2014
We see less urgency for KEP to chase new contracts as its yard capacity is almost fully booked till 2014. The last jack-up rig option exercised by Ensco in Oct is due for delivery in 3Q14. KEP should be less susceptible to competitive bidding (lower-margin jobs) over the next 12 months, we believe.

O&M earnings to recover in 2013
We believe lower O&M earnings in 2012 are a given, caused by its lack of orders in 2009/10. However, we expect O&M earnings to recover in 2013 (+25% yoy), thanks to the record S$8.7bn contracts it secured in 2011.

20/80 payments could be a time bomb
Eighteen out of the 28 jack-up rigs under construction by KEP are on 20/80 payment terms. Concerning this, we note that working capital is likely to be stretched over the next 12-15 months as KEP has to finance their construction until deliveries. Second, the payment terms could be a time bomb if a banking crisis erupts. Customers (mainly non-rig operating speculators such as Standard Drilling and Asia Offshore) could run into funding problems and find themselves unable to take deliveries when their final payments are due in 2013.

Peak margins
We believe margin expansion has reached the end of a chapter for Singapore rig builders. The high-margin jobs bagged in the last rig cycle are approaching completion, by end-2011.


Source/转贴/Extract/Excerpts: CIMB-Research,
Publish date: 02/12/11

S-chip hits back at SGX

S-chip hits back at SGX
12:03 AM Dec 22, 2011
SINGAPORE - S-chip nylon fiber maker China Sky Chemical Fibre has hit back at the Singapore Exchange (SGX) - claiming that its reprimand was "issued without any merit and clearly showed a total disregard of the interest of the shareholders".

In its statement - the second in three days - China Sky responded to the reprimand issued by SGX last Friday.

SGX had accused the company of persistently failing to comply with its directives - including ordering China Sky to appoint a special auditor to investigate into some of its financial dealings - "despite every opportunity offered to the company and its board".

China Sky pointed out yesterday that it had responded to a series of demands for information and queries from the SGX officers since April 2009.

It added: "Despite the company's efforts, our CEO received a threat from a Senior SGX officer that the company would be 'punished' for its 'disobedience' unless it complied (with the directive to appoint a special auditor)."

The company appended the minutes of a telephone conversation to its statement to support its claim.

China Sky had suspended trading of its shares since November 17. It said it would lift the suspension today, as it believes that SGX will not provide any information to state the basis and rationale for its directive on the company.

"SGX would not be furnishing such requested information for the time being. Thus, the continuing suspension of the trading of the Company's shares would serve no useful purposes," said the company.

In a statement yesterday, Securities Investors Association (Singapore), or SIAS, called for China Sky to immediately comply with the directive to appoint a special auditor under the listing rules so that the trading suspension can be lifted. Trading in China Sky shares has been halted since Nov 17.

SIAS also called on China Sky and its directors to adhere to corporate governance standards here.

'SIAS is perturbed to learn from SGX's statement dated Dec 16, 2011 that queries from the Singapore Exchange (SGX) to the company have been met with contradictory statements and disclosures which were not substantiated,' it said.





Source/转贴/Extract/Excerpts: TODAYonline
Publish date:22-12-11

HSBC to sell Japan private banking business to Credit Suisse

HSBC to sell Japan private banking business to Credit Suisse
04:45 AM Dec 22, 2011
TOKYO - HSBC Holdings, Europe's largest lender by market value, has agreed to sell its Japanese private banking business to Credit Suisse as it seeks to cut assets and reduce expenses in preparation for tighter capital rules.

The sale of the unit, which had US$2.7 billion (S$3.5 billion) of assets as of end-October, is expected to be completed in the second quarter of next year, London-based HSBC said yesterday, without disclosing the price.

"(HSBC) is focusing on raising its return on equity and cutting costs, so it will focus on the high growth business," said Sun Hung Kai Financial strategist Daniel So. "They probably don't see much growth potential in the Japanese market, so will do better to focus resources in other countries in the Asia-Pacific region."

HSBC will sell its top-tier Japanese private banking business, which covers clients who hold more than ¥200 million (S$3.3 million) in financial assets, said an unnamed official at HSBC Japan. But it will retain HSBC Premier, which covers clients who hold more than ¥10 million in assets, the official said.

Credit Suisse, which has an office in Tokyo, said it plans to expand client coverage through integrating new offices in Nagoya and Osaka in western Japan.

Mr Junya Tani, head of private banking for Credit Suisse in Japan, said the deal showed the lender's "commitment to build a leading private banking business in Japan, acquire assets and drive profitability". AGENCIES



Source/转贴/Extract/Excerpts: TODAYonline
Publish date:22-12-11

CapitaLand's Ascott may list assets in M'sia

CapitaLand's Ascott may list assets in M'sia
04:45 AM Dec 22, 2011
KUALA LUMPUR - CapitaLand's serviced residence unit The Ascott may group its Malaysian assets and list them on the local stock exchange, the New Straits Times daily reported yesterday.

It may also inject the assets into Ascott Residence Trust, a real estate investment trust (REIT) listed in Singapore to expand the REIT to generate more income from shareholders, a company official was quoted as saying.

"We are toying with several options now. We are still looking at a REIT in Malaysia but the current market is not conducive for us to launch one now," said Ascott regional general manager for Singapore and Malaysia, Mr Tan Boon Khai.

"We were looking at a REIT in Malaysia a few years ago but then crisis hit in 2009. We are bullish on the market but we need to identify our assets. A REIT has to be worth over RM1 billion (S$408.3 million)," Mr Tan said. AGENCIES


Source/转贴/Extract/Excerpts: TODAYonline
Publish date:22-12-11

散户如何布局下一个牛市


虽然降息后,今天股市下跌了,但随着降息不断被释放的流在明年会不会由于国内流动性的放出,使得整个资产价格会面临着新一轮的上涨?

  2006年、2007年的情况会不会重新出现?潘向东说2010年股市将重启黄金十年,他的理由是什么?如何布局下一个牛市?


Source/转贴/Extract/Excerpts: 新浪视频
Publish date:2008年12月25日

李驰:A股该准备“燃烧弹”了


主持人:李南、邀请嘉宾:深圳同威资产管理公司董事长李驰和光大证券首席宏观分析师潘向东、播出日期:12月19日(星期五)晚上24点、视频简介:最谨慎的私募基金经理李驰为什么认为股市好时机已到?他为什么一直对大金融股持乐观态度,看好银行股?同时李驰还预期股市跟房市会比银行存款将会越来越便宜。而来自光大证券首席宏观分析师潘向东则说从短期来看,持有银行股风险比较大。另外,如果银行股整体走得不好,那么股价会不会有“二次探底”出现?


Source/转贴/Extract/Excerpts: 新浪视频
Publish date:2008-12-22

Singapore Retail Reits: Stable sector amid market gloom (DBSV)

Singapore Retail Reits
Stable sector amid market gloom
• Consumers may become more cost conscious
• More resilient non-discretionary spending should support suburban retail sales and rents
• Positive rental reversion and AEI to underpin Retail Reit earnings
• Prefer MCT (TP S$1.09) and CMT (TP S$2.08)

Back to basics.
YTD (9M11), retail index excluding motor vehicles sales grew by 8.1% y-o-y, which is a shade below the 2007 peak driven largely by discretionary spending. Looking ahead, we believe consumers may start to tighten their belts amid growing economy uncertainties with early indicators signaling weakening consumer confidence. That said, unemployment at relatively low levels of c2-3%, should help to partly offset the drag and support consumer spending. Hence, malls comprising higher components of supermarket and departmental stores will fare better.

Suburban occupancy and rents show resilience.
Occupancy in the retail market is generally higher than office and the multi-factory industrial space as supply activities in the retail sector are less speculative. As evident in 2009, despite economic uncertainties, retailers took up a total of around 1.6 m sq ft of retail space (>3x the long term average) and occupancy dipped only by a marginal 1%pt, hence underlining the resilience of the sector. Within this space, suburban occupancy and rents appeared to be “stickier” than Orchard Road prime space during recessionary periods. In addition, suburban retail space per capita is still under served compared to other major cities and will benefit from the steady population growth.

Earnings underpinned by positive rental reversion and AEI works.
During the GFC, we noted that average occupancy rates of the retail reits were high, moving within a tight 1%pt with suburban landlords able to renew rents up. Hence, we believe that rental reversions for retail space will remain positive despite the anticipated slowdown in economy. Earnings growth will also be underpinned by asset enhancement initiatives and asset repositioning moves.

Stock Picks: MCT and CMT.
Among the retail landlords, we like MCT as it has the highest proportion of its income up for renewal. We expect healthy positive rental reversion given that the expiring rents were locked in at lower rates. We also like CMT as a market leader in its space. Both MCT and CMT also offer FY11-13F earnings CAGR of c.8%, one of the highest in the Sreit sector.

Consumers to focus more on staples should economic woes continue
Retail sales numbers should remain healthy for the rest of the year. YTD ( 9M11) retail index excluding motor vehicles sales grew by 8.1% y-o-y, which is a shade below the 2007 peak. The robust performance was boosted by discretionary retail sales. Sales of discretionary goods such as jewellery and watches experienced significant growth of 23% ytd, while clothing and footwear, departmental stores and medical related items enjoyed healthy single-digit growth. Despite the economic uncertainties, retail sales for discretionary goods is still likely to remain healthy in 4Q supported by the year-end holiday season and festivities.

Looking ahead…
Low unemployment levels to sustain consumer spending. With growing uncertainties on the global economy, the Singapore Consumer Confidence Index by Nielsen Global showed that confidence level has contracted by nine points to 94 in the three months to September compared to a quarter before. In addition, the recent round of property cooling measures could further erode consumer confidence. That said, we think the low unemployment levels should support consumer spending. DBS economist Irvin Seah projects FY12 unemployment rate to hover at around 2.2 -2.4%. As seen in the chart below, retail sale turned negative only when unemployment rate exceeds 3.5%.

Discretionary consumption may give way to a more consciousconsumer.
We expect sales of discretionary goods to slow as consumers keep their spending on "wants" in check. In the 2009 downturn, retail sales for supermarkets and department stores that sold mainly daily necessities showed positive trend, while retail sales for big ticket items such as watches, jewellery and bulky goods contracted by close to 10%.

Healthy fundamentals to support occupancies and current rentals
Occupancies are higher than other sectors. Generally, retail occupancy levels are higher than office and the multi-factory industrial space as retail landlords are mindful in maintaining mall occupancies, since this would affect the ability to attract shopper footfall. In 2009, islandwide retail occupancy fell by a marginal 1%pt compared to 3-4%ppts in the industrial and office sectors. The historical trend shows that retail sector occupancies fluctuate within a narrower bandwidth of between -2%pts to +2%pts compared to the other sectors with a variance of -5%pts to +5%pts.

Less speculative construction, demand was highest during GFC. Retail malls, especially those sizable ones, are pre-planned by the government to cater to the population growth pattern in a particular catchment area. In 2009, despite the uncertain economic conditions, retailers took up a total of around 1.6m sq ft of retail space, in line with the spike in supply for that year which led us to believe that construction activities are less speculative.

Suburban mall occupancies move within a tight range of - 3ppts to +3%ppts over the past decade. Suburban malls typically serve a population catchment that resides within a 3km to 5km radius from the mall and fulfill most of the shoppers needs with supermarkets and food-and-beverage offerings. The suburban sub-segment was resilient during the GFC in 2008-2009, with occupancy levels staying above 90% (ranging between 92% - 96%). We also understand that chain stores and supermarkets are usually present in well located new suburban malls, and this helps to sustain occupancies.

Occupancies in Orchard Road are recovering. As the most prominent shopping stretch, Orchard Road malls have the highest occupancies for most of the time between 2000 and 2009. However, the large influx of new space in 2009/2010 coupled with a drop in tourist arrivals in 2009 saw occupancy rates falling by an average of 5.0%pts - the largest fall over the decade. On the back of strong demand from new-to-market retailers, as well as expansion from existing tenants, occupancy has climbed to 94% as at 3Q11, which is slightly below its long term average of 95%.

Transformation of Orchard Road should help attract more international brands. While Orchard Road has witnessed the closure of big tenants like fashion and accessories store ALT at
The Heeren and Borders at Wheelock over the last 12 months, there are new exciting additions. These include luxury brands such as Michael Kors, as well as mid tier brands like Aeropostale, Payless Shoes and H&M. US retailer Abercrombie & Fitch will be opening their first 21,000 sf marquee store at Knightsbridge. We believe this would make Singapore’s retail scene more appealing and vibrant, and attract more international retailers. Hence, these should drive shopper’s footfall.

Weaker tourist arrivals in 1H12 could see retail sales growth at Orchard Road slow. It is estimated that tourist spending account for 15% of the islandwide retail sales and c.30% - 40% of those along Orchard Road. In our hospitality report in Sep 11"Heading into our pit stop", we highlighted that while we remained cautiously optimistic on the tourist arrivals in FY2012, we expect slower tourist arrivals in 1H12 amid the global economic uncertainties before seeing a pickup in 2H with the opening of several new tourist attractions. The slowdown in tourist arrivals coupled with a pull back in discretionary spending may have negative impact on Orchard Road retail sale.

Pipeline supply is 30% less than the previous peak. In 2007, the construction of new malls along Orchard Road and retail space from the two IRs had resulted in about 8.1msf of new supply in the pipeline. This was part of the government’s plans to rejuvenate the city and boost tourist offerings. Since then, supply has tapered off to 6.1msf as of 3Q11, which is about 30% less than the supply pipeline in 2007 during the market upcycle. The current supply pipeline would be completed between 2012 -2015, translating to about 1.2msf p.a..
Including retail space withdrawn for AEI works, we estimate that annual supply could be closer to the 1.0-1.1msf range.

Supply in the next two years will swing towards the suburban areas. We estimate 59% of the incoming supply will be located in the suburban areas, while 15% and 14% will be located in the City Fringe and Downtown areas respectively. Supply for the Orchard Road and Rest of Central Area will be relatively limited upon the completion of several malls along Orchard Road. While the forward supply outlook in the suburban market may seem high, we are cautiously optimistic that there should be sufficient occupier demand to absorb the additional supply. In addition, these malls are not concentrated in any one location; they are located in a few major catchments areas to cater to the respective neighbourhood residents.

Playing catch-up to the growing population. Despite a surge in supply in recent years, retail stock has only risen by 1.6% p.a. This is notwithstanding that the new supply in the last two years was mostly in the Central area (Orchard Road and from the two IRs). Meanwhile, the resident population has increased by 2.4%. Hence, floorspace per capita in Singapore is still relatively low at 10.7sf compared to other major cities. Singapore’s population is forecast to grow by 1.5% p.a, and this will have a positive impact on footfall in suburban malls.

No new major suburban sites in 1H12 GLS programme. All new commercial land supply for 1H12 is in the reserve list. We note that only suburban site available for sale in the 1H12
Government Land Sales (GLS) Programme is in the growing Punggol residential area. The site, which has a max GFA of 32,300 sf is likely to be for F&B use. Therefore supply outlook in the retail market is likely to be stable.

Rents continue to rise in 3Q11. According to CBRE, suburban rents increased by 2.9% q-o-q in 3Q11 to S$29.75 psf/month, while average rents for prime Orchard Road space rose by 5.0% q-o-q to S$31.60 psf/month in the same period lifted by healthy tourist spending and retail sales. Going forward better located and well managed malls to outperform the market.

Less downward pressure on rents in suburban areas during a prolonged downturn. While prime Orchard area enjoys higher rental upside due to the “tourist spending” effect during economic recoveries, the segment also suffered larger declines of 33% during the Asian Financial Crisis and 17% during the 2009 GFC. In comparison, suburban rents fell 20% and a mere 3% for the same period respectively, thanks to a ready catchment of residents in the area, steady demand for basic goods and less competition from new malls.

Capital values increase, cap rate compresses further. According to URA statistics, the median prices in Central area rose by 3.8% q-o-q to S$1,077 psf in 3Q11 after a 3.5% increase in the 2Q. Consequently, prime retail yields faced further compression of 49 bps in the 3Q to 5.2% and 100 bps from 4Q09 on the back of rising capital.

Earnings risks to Retail REITs
3Q11 results – growth boosted by positive reversions. Retail REITs posted healthy 3Q11 results. Except for SGReit, topline, net property income and distributable income were higher compared to a year ago, supported by healthy rental reversion and completion of AEI works. The marginal decline in SGReit was due the commencement of Wisma Atria AEI works and weaker performance for its overseas properties. We see sustained earnings growth momentum (y-o-y and q-o-q) for the Retail Reits in 4Q11, supported by the year-end holiday season and festivities.

Occupancy rates have remained relatively steady. During the 2008/2009 GFC, we noted that average occupancy rates were sustained at high levels for most retail landlords except for FCT which was affected by the ongoing AEI works at Northpoint. We attribute this to the REIT managers’ proactive asset and property management strategies. Some landlords such as CMT and FCT even managed to renew their rents up during the GFC.

Asset enhancement initiatives and asset repositioning to underpinned earning growth. CMT’s is expected to unveil Jcube and Atrium development over 2011-12, FCT is expected to complete refurbishment works of causeway point asset in 2013 and Starhill Global REIT’s Wisma Atria property is undergoing upgrading which will incorporate new duplex units with full frontage and will reopen by 1Q12 that is expected to progressively complete over in 2011-2012. The completion of these asset enhancement works will underpin earning growth and keep the mall updated is critical given the increasing competitive retail landscape.



Improved tenant occupancy cost provides a buffer. Occupancy cost for FCT and CMT improved from 14.8%-16.8% in 2009 to 13.7%-16.4% in 2010 indicating that tenants’ turnover have grown. Industry benchmark is 16–18%, hence this should provide some buffer should retail sales decline.

Balance sheet - healthy. The Retail Reit sector’s average leverage still remains relatively healthy at 31% to 40%, below the comfort level of 45%. We note that there has been an increase in the number of assets that are unencumbered and limited near-term refinancing obligations have fallen. This empowers the Retail Reits with more financial flexibility going forward. In addition, most of the Retail Reits have a high portion of their debts fixed and hence should be less impacted by interest rate movements.



Limited risk from expansion in cap rates. Capital values of retail properties this year benefited from an improvement in underlying rental income rather than cap rate movements. We note that movement in cap rates is small at between -25 to +15 bps and is well above CBRE’s 3Q cap rates.

Stock Picks
We continued to like suburban malls as they are more resilient to external shocks since a higher proportion of tenants are non-discretionary retailers so sales are more stable even during a recessionary period. At the same time, they are also likely to benefit from steady population growth.

Within this space, we like MCT as it has the highest proportion of its income up for renewal (c39% of top line vs 31-33% for peers) in FY12/13F. We expect healthy positive rental reversion given that the expiring rents were locked in at lower rate and this is its first renewal cycle. We recently visited VivoCity, its main retail mall and noted that footfall remained strong. We also like CMT as a market leader in its space. We believe that earnings are likely to remain robust boosted by the completion of JCube at end of 2011, as well as ongoing AEI works and new projects.

Both Reits also offer FY11-13F earnings CAGR of c.8%, one of the highest in the Sreit sector.






Source/转贴/Extract/Excerpts: DBS Vickers Research
Publish date:13/12/11
Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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