Asia Pacific Equity Research | Singapore

MARKET

PULSE
Key Idea
Chg 46.1 1.1 10.4 9.8 3.8 -95.6 127.9 % Chg 1.4 0.6 1.3 1.3 0.7 -4.7 10.3

Morning Call 19 Jun 2013

Key Singapore Indices Close 3229.6 179.7 821.9 759.0 529.0 1982.6 1366.4

STI Catalist Finance Property Electronics Vol(m) Val(S$m)

World Indices Close 15318.2 3482.2 1651.8 6374.2 1774.1 21225.9 13007.3 1427.4 1900.6 8011.0 Chg 138.4 30.1 12.8 43.7 1.9 0.0 -25.8 -43.6 17.5 18.1 % Chg 0.9 0.9 0.8 0.7 0.1 0.0 -0.2 3.0 0.9 0.2

Dow Jones Nasdaq S&P500 FTSE KLCI Hang Seng Nikkei SET KOSPI TWSE

Ezion Holdings: Resilience in the stock price The recent market sell-down has highlighted the resilience of the stock of Ezion Holdings. YTD, the STI has given up its gains this year, while the FTSE Oil and Gas Index is down about 1.2%. However, investors of Ezion are still sitting on gains of about 35.5%. Possible reasons behind this good performance include 1) good earnings visibility from its secured contracts, 2) limited risk of contract cancellations with its well-diversified and established customer profile, and 3) upside risk as Ezion leverages on its scalable model to continue to expand its presence in various parts of the world. Our fair value estimate of S$2.62 is based on Ezions existing contracts; contracts secured in the future that impact FY13F and FY14F earnings may be further price catalysts. Maintain BUY.

More reports: - United Envirotech: Establishes US$300m MTN programme - CapitaLand Limited: Acquires mixed Shanghai site - Keppel Land: Secures residential landed site in Shanghai

Market Statistics (SG) STI No. No. No. 52-week range of gainers of losers of unchanged 2,799 3,465 349 171 143

News Headlines US stocks rallied on Tuesday, with a two-day advance wiping out last weeks losses, as Wall Street gave an advance thumbs up to the upcoming Federal Reserve monetary-policy announcement. Intraco Limited has extended its mandatory cash offer for its listed associated company Dynamic Colours Limited by two weeks. ST Aerospace, a unit of ST Engineering, announced a string of contract wins yesterday, including a US$28m maintenance deal with Spring Airlines Japan and a 20year repair license agreement to provide MRO services for US-based UTC Aerospace Systems. Hengyang Petrochemical Logistics has found a strategic investor in MEGCIF Investments 5 Ltd, which is investing 271.25m yuan (S$54.25m) for a 35% stake in its new subsidiary, Hengyang Holding. Singapore has contacted Indonesia to express "serious concerns" over the worsening haze crisis, urging Jakarta to name the errant companies involved in illegal forest burning.
Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$) 1.3 95.5 0.4 0.3 98.6 0.0 0.2 0.0 0.0 0.2

Research Team (65) 6531 9800 e-mail: info@ocbc-research.com

Please refer to important disclosures at the back of this document.

MCI (P) 006/06/2013

OCBC Investment Research Market Pulse 19 Jun 2013

Ezion Holdings: Resilience in the stock price Investors still sitting on 36% of gains Still has upside Fair value based on existing contracts Resilience shows during times of volatility The recent market sell-down has highlighted the resilience of the stock of Ezion Holdings the STI has lost about 6.8% from its 52week high of 3464.79 on 22 May 2013, while the FTSE Oil and Gas Index has slipped about 3.5%. In contrast, Ezions share price has dropped by about 3.4% over the same period. YTD, the STI has given up its gains this year, while the FTSE Oil and Gas Index is down about 1.2%. However, investors of Ezion are still sitting on gains of about 35.5% YTD. Possible reasons behind good performance What could account for this show of relative stability? Ezions earnings are backed by secured contracts for a fleet of 27 liftboats and service rigs, five out of which contribute to the share of associates/JV line. Earnings from its first liftboat started to flow in 1Q10, and the group currently has contracts extending till 4Q18, not counting options that may be exercised by the customers in the future. The groups customers are also established players in the oil and gas industry and are usually national oil companies from various parts of the world, providing good diversification. As such, we see limited risk of contract cancellations, especially with oil prices expected to remain elevated in 2013 and 2014. Indeed, there is currently more upside risk as Ezion leverages on its scalable model to continue to expand its presence in Asia, the Gulf of Mexico, and the North Sea. Still has upside; fair value based on existing contracts Our fair value estimate of S$2.62 (12x FY13/14F core earnings) is derived from the expected contributions of Ezions existing contracts. Contracts that the group secures in the future that will have an impact on FY13F and FY14F earnings may be further price catalysts. Despite the good stock price performance YTD, we still see an upside potential of about 14% over a one-year time frame. Maintain BUY. (Low Pei Han) . . . . .

United Envirotech: Establishes US$300m MTN programme Preparing for investments Upbeat about treatment industry Catalyst from project wins Establishes US$300m MTN programme United Envirotech Ltd (UEL) has recently announced the establishment of a US$300m MTN (medium-term note) programme, where it may from time to time issue medium-term notes in any currencies including S$, US$ and CNY to refinance existing borrowings, make investments and/or acquisitions, and general working capital and corporate purposes. It has also made an application to the SGX-ST for permission to deal in and quotation of any notes on the exchange (as and when these notes are issued). Getting ready for more investments According to management, the main rationale for the MTN programme is to get ready its funding to cater for the still-buoyant waste-water treatment industry in China. This as it continues to see growing demand for membrane-based water and waste-water treatment services, driven by stricter discharge limits imposed by the Chinese government and the shortage of water supply in various parts of the mainland. Currently, it is actively seek out suitable engineering and investment projects; but in the longer run, UEL intends to continue expanding its stable and recurring treatment income. Financial muscle does matter As the water treatment business is pretty capital intensive, UEL has already moved to raise funds over the past year or so. After its convertible bond issue and share placement to KKR, the company has about S$88m of un-utilized proceeds. Based on its usual 40% equity/60% debt policy, management believes it can comfortably finance up to S$220m worth of projects. And with the MTN programme, UEL will have access to another source of funds that it can tap upon should the need arise. Project wins will act as catalyst Since we had recently revised our estimates after its FY13 results, we opt not to change anything for now. Hence our fair value remains unchanged at S$1.03 (still based on 13x FY14F EPS). But we do see potential catalyst coming from project wins. Maintain BUY. (Carey Wong) . . . . .

OCBC Investment Research Market Pulse 19 Jun 2013

CapitaLand Limited: Acquires mixed Shanghai site CapitaLand (CAPL) announced yesterday that it has paid RMB1.95b (S$397.5m) for a 70% stake in Shanghai Guang Chuan Property Co. Ltd, which owns a prime site in Hanzhonglu, Zhabei District, Shanghai. The 25.4k sqm site has a total GFA of 110k sqm (105k sqm GFA above ground comprising 75k of office and retail space and 30k sqm residential) and is located within a 15-min drive from the Shanghai CBD. The project is expected to begin construction in 2015 and complete by 2017. The price paid translates to an acquisition cost of RMB25.3k per sqm which we see as a fairly reasonable level for this site. The completion of the acquisition is subject to the approval from PRC authorities and is expected to take place by 2Q14. Maintain BUY on CAPL with an unchanged fair value estimate of S$4.29 (20% discount to RNAV). (Eli Lee) . . . . .

Keppel Land: Secures residential landed site in Shanghai Keppel Lands (KPLD) announced that it has acquired a 17.5ha residential site in Shanghais Seshan area for RMB1.33b (S$266m) on which it would develop ~200 landed homes with 250-350 sqm GFA. The site is 20km away from Shanghai Hongqiao International Airport and 32km from the city centre and is KPLDs ninth project in the city of Shanghai. Owners of landed homes on the site would enjoy views of the Sheshan National Forest Park. We take a positive view on this acquisition and estimate that it would accrete 3.5 to 5.2 S-cents to KPLDs RNAV. We would speak further with management later today and, in the meantime, maintain BUY with our fair value estimate unchanged at S$4.53 (25% discount to RNAV). (Eli Lee) . . . . .

OCBC Investment Research Market Pulse 19 Jun 2013

Calendar of key events

Tue 18-Jun-13
China May Property Prices US May CPI US May Housing Starts

Wed 19-Jun-13

Thur 20-Jun-13
US Jun FOMC Rate Decision US Jun Philadelphia Fed US May Existing Home Sales

Fri 21-Jun-13

24-Jun-13
SG May CPI

25-Jun-13
US May New Home Sales

26-Jun-13
SG May Industrial Production US 1Q GDP

27-Jun-13

28-Jun-13
SG May Bank Loans & Advances US Jun U of Michigan Confidence

01-Jul-13
China Jun Mfg PMI US Jun ISM Mfg

02-Jul-13

03-Jul-13
China Jun Non Mfg PMI US Jun Total Vehicle Sales US Jun ISM Non Mfg Composite

04-Jul-13

05-Jul-13
US Jun Unemployment Rate

08-Jul-13

09-Jul-13
China Jun CPI

10-Jul-13
China Jun Exports YoY China Jun Imports YoY

11-Jul-13
US Minutes from Jun 18-19 FOMC Meeting

12-Jul-13
US Jul U of Michigan Confidence

15-Jul-13
SG May Retail Sales China Jun Ind Production China Jun Retail Sales China 2Q GDP UJun Adv Retail Sales

16-Jul-13

17-Jul-13
SG Jun NODX

18-Jul-13
China Jun Property Prices

19-Jul-13

Notes:

All US Tech results dates have been adjusted to Singapore dates. US Initial jobless claims are released every Friday. MBA mortgage applications are released every Wednesday.

OCBC Investment Research Market Pulse 19 Jun 2013

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