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Investors’ Corner
Investors' Corner | 29 May 2009
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By: Xavier Lim
Articles (51) Profile

Price – $3.43          Target – $3.80

CapitaLand’s 31.4%-owned CapitaCommercial Trust (CCT) is proposing a 1-for-1 rights issue to raise $828m. CapitaLand has undertaken to subscribe to its pro-rata entitlement, but is not undertaking to subscribe to CCT units in excess of its proportionate 31.4%-stake. At the rights issue price of $0.59 each, CapitaLand’s share of the rights issue comes to $260.4m. We calculate CapitaLand’s share of the property devaluations from CCT and CapitaMall Trust would amount to $231m to be recorded in the group’s 2Q09 results. The asset devaluations would be offset in part by potential revaluation gains from investment properties currently under development. We have assumed $125m of revaluation gains primarily from the group’s 50% share of ION Orchard retail mall to be recognized, possibly in the 2Q09 results. Raising our end Dec 09E price target to $3.80/share, now based on a 20% discount to our $4.70/share FY09E RNAV estimate. OVERWEIGHT.– JPMorgan (22 May)

Golden Agri-Resources
Price – $0.47          Target – $0.50

Golden Agri’s share price has risen more than two-fold since November 2008 and we believe it is no longer cheap. We believe the weak 1Q09 result, due to adverse weather, was a temporary setback and will be reversed. We are positive on CPO prices and forecast an average price of US$700/t (vs US$650/t) for 2009. The company announced that it is considering a US$200m rights issue to fund expansion. This is despite Golden Agri’s 0.09x net gearing as at 1Q09 and its US$138m cash balance. CPO production is suffering in parts of Indonesia due to adverse weather conditions. Drought-like conditions have led to poor yields for Golden Agri. The 17% fall in CPO production was caused by a 24% fall in CPO yield and a 24% fall in FFB yield. We were expecting a 15% rise in CPO production for the year. We expect the drought in parts of Indonesia to depress CPO production by 5% in FY09 to 1,610 tonnes. Downgrade to HOLD.– RBS (26 May)

Neptune Orient Lines
Price – $1.39          Target – $1.00

NOL’s container shipping volumes from 4 April to 1 May were down 22% yoy (up 2% MoM). YTD volumes are now down 26% versus our 2009 full year forecast of a 9% decline. This implies volumes will be flat yoy for the rest of 2009, which could prove to be optimistic. That said, we expect volume growth to be positive in 4Q09 given the low base in 4Q08. Average April freight rates were down 21% yoy (down -1% MoM). We believe the modest increases in Asia-Europe rates from 1 April were unable to offset the further weakening of rates across other trade lanes. YTD shipping revenues are down 39% versus our full year forecast of a -23% decline. Recent press reports from Lloyds List & SCMP indicate that shipping lines have agreed to a double digit decline (10%+) in Transpacific (TP) rates from May. If this proves to be correct, it is slightly worse than our forecast of a 10% decline in industry TP rates. We continue to expect a severe demand/supply imbalance in 2009. SELL.– UBS Investment (26 May)

Price – $2.81          Target – $3.34

Bharti and MTN are again exploring a merger, resulting in Bharti taking a 49%-stake in MTN and consolidating MTN’s results. SingTel is not directly involved and is therefore only affected through valuation impacts on Bharti. SingTel’s effective stake in Bharti would drop from the current 30.7% to 19.6% of the enlarged Bharti-MTN post-transaction completion. On the basis of the share and cash offer, and taking into consideration closing prices on 22 May, the deal would destroy US$3.8b in value for Bharti shareholders if no offsetting synergies were achieved. Bharti is currently undergeared and the US$4b net cash outflow from the transaction drives the net debt to unconsolidated EBITDA to 1.4x; still comfortable. Therefore, Bharti does not require financial assistance from SingTel to complete the transaction. SingTel’s share of US$3.8b in “value destruction” in Bharti would equate to $0.11/share in value destruction at SingTel. Maintain OUTPERFORM.– Credit Suisse (26 May)

Armed with an arsenal of investment knowledge, Xavier is the Senior Research Editor at Shares Investment.

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CapitaLand  3.450 -0.02 -0.58%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More
Golden Agri-Resources  0.290 -- --   
Business: Co is engaged in cultivating & harvesting oil palm trees, processing fresh fruit bunches (FFB) into crude palm oil (CPO) & palm kernel (PK), & refining CPO into industrial & consumer pdts.

Insight: May-19, 1Q19 revenue fell 11% due to softer crude ... Read More
Singtel  3.250 +0.01 +0.31%   
Business: Asia's leading communications group. [FY19 Turnover] Mobile Comm (31.1%), Data & Internet (19.2%), Infocomm Technology (17.5%), Sale of Eqmt (16.5%), Digital Biz (7.2%), Fixed Voice (5.2%), Pay-TV (2.1%), Leasing (0.8%), others (0.4%).

Insight: May-19, FY19 operating revenue remained flat at $1... Read More

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