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Biosensors International Group (BUY; Target Price: S$1.68)

Biosensors International Group (BIG) reported a sturdy set of 1QFY12 results which exceeded our expectations. Revenue rose 72.7 per cent YoY US$57.0 million, forming 22.3 per cent of our FY12 forecasts. Core earnings increased 143.6 per cent YoY to US$24.1 million; constituting 28.9 per cent of our full-year estimates. BIG’s sterling performance was fuelled by both higher product sales and licensing revenues from Terumo, which allowed the group to exceed the growth of the overall drug-eluting stent market substantially. A better product mix and increased economies of scale in manufacturing also helped to boost its margins. Management reaffirmed their total revenue guidance of 50-60 per cent growth for FY12, subject to the completion of acquisition of JWMS (remaining 50 per cent equity stake). Taking into account the better-than-expected set of results, we raise our FY12/13F core earnings by 13.4/6.8 per cent. BIG remains a BUY as fundaments remain strong. – OCBC Investment Research

CDL Hospitality Trusts (BUY; Target Price: S$2.30)

CDL Hospitality Trusts’ (CDL HT) 2Q11 gross revenues grew by 13 per cent to S$34.6 million. Organic growth remains strong with its Singapore portfolio posting RevPAR (revenue per available room) growth of 4.8 per cent YoY to S$205/night, backed by high occupancy level of 88 per cent and partial contribution from the newly acquired Studio M hotel (acquired in May 2011). Net property income grew by a higher 24 per cent YoY to S$35.6 million largely due to a one-off tax rebate of S$3.3 million. As such, distributable income grew 31 per cent to S$31.7 million largely due to interest savings from its loan refinancing. For 1H11, the trust will be distributing 5.34 S-cents, which implies a payout ratio of 90 per cent. We note that Orchard Hotel (OCH) had 4,417 room nights and Novotel Clarke Quay Hotel (NCQ) had 1,133 room nights taken out of total sellable room inventory for 2 weeks, which limited optimal portfolio performance. However, we remain optimistic that when renovations are completed, these rooms, estimated to command 10-15 per cent higher rates on average, should enable higher earnings growth for the Trust towards the end of the year. Management’s stance towards optimising portfolio yields from the execution of its refurbishment plans should sharpen its competitive edge against peers and translate to longer-term earnings sustainability, in our view. – DBS Vickers

CWT Limited (BUY; Target Price: S$1.90)

CWT announced that it has entered into an agreement to develop a S$135 million warehouse for AIMS AMP Capital Industrial REIT (AACI REIT). This marks its debut as a warehouse developer for a non-related third party. Under the terms of the agreement, CWT will undertake to design and construct a warehouse at 20 Gul Way within the Jurong Industrial Estate. Upon completion, the company will sign a master lease agreement with AACI REIT for the property for 4-5 years. This arrangement is not unlike the sale-leaseback model it has with Cache REIT, except that CWT does not need to fund the project at all. We see three benefits from this undertaking. First, CWT stands to reap a development profit estimated at S$40 million, or about 30 per cent of the project cost. Second, there will be a handy revenue stream for its logistics business once the warehouse is completed in 28 months’ time. Finally, immediate availability of land with all the relevant permits from JTC to boot, with its own landbank untouched.  As we have repeatedly highlighted, CWT’s warehouse development business is an attractive one with high entry barriers. We believe it has been chosen for this project because of its ability to guarantee tenancy, given its market leadership position in logistics in Asia. That it can now develop on third-party land signifies progress and implies that this business is more sustainable than the market believes. For this project, no investment is required of CWT. It needs just to fork out working capital of S$5-10 million and subscribe for units in AACI REIT to the tune of S$2.5 million. We keep our estimates intact as the auditors discuss how the profit (possibly S$40 million) will be recognised (likely progressively over the next 28 months). – Kim Eng Research

ECS Holdings (Not Rated)

ECS has been a hive of activity in recent months, starting with the clinching of distribution rights for Apple’s iPad and iPhone products in China late last year. Early last year, it also listed its Malaysian subsidiary on Bursa Malaysia, albeit at valuations similar to the Singapore listco, and it is now pursuing a depository receipt listing in Taiwan. ECS secured the distributorship for Apple’s iPad (now iPad 2) and iPhone 4 in China late last year. Already, the country accounts for almost half of group revenue of more than S$3 billion. FY11, which should see a full year’s contribution from the Apple distribution contract, will also be further boosted by Apple’s plans to launch a new iPhone, most likely in the third quarter of this year.  Unlike listed comparables such as Synnex  and Digital China, ECS trades at only 5-6x historical and 4-5x consensus earnings forecasts. Synnex trades at 14-17x forecasts while Digital China is valued at 10-12x. ECS hopes that a TDR listing to raise an estimated $50m will prompt the market to realise that it is undervalued. It is currently in the process of submitting documents to the Taiwan Stock Exchange. – Kim Eng Research

Frasers Centrepoint Trust (BUY; Target Price: S$1.77)

Frasers Centrepoint Trust (FCT) reported 3QFY11 DPU of 1.95 S-cent, which represents 24 per cent of our FY11 estimate. Net property income fell 13.4 per cent YoY to S$20.1 million mainly due to income loss from the asset enhancement initiatives (AEI) at Causeway Point (CWP). CWP’s occupancy was at its lowest in March 2011 at 69 per cent since the commencement of CWP AEI. Due to time lag difference, the negative impact of lower occupancy rate only hit FCT in 3QFY11 which registered gross revenue drop of 11.1 per cent YoY to S$27.3 million. However, with the swift progress of AEI and higher occupancy of 78 per cent as at June 2011, we expect CWP to drive the revenue and DPU growth for FCT in 4QFY11. For the upcoming 4QFY11, we expect DPU to be stronger at 2.02 S-cent on the back of higher occupancy rate at CWP as a result of greater level of AEI completion. Separately, FCT now expects Bedok Point to be acquired in 4QFY11. The addition of Bedok Point will add additional 81,000 sq ft of NLA (net lettable area), which represents 10 per cent of FCT’s Singapore portfolio NLA. – DMG Research

Mapletree Industrial Trust (BUY; Target Price: S$1.21)

Mapletree Industrial Trust’s (MINT) 1Q11 results were in line with expectations. Gross revenues and net property income were higher than IPO forecast but in line with our targets at S$55.0 million and S$38.2 million respectively. Distributable income was higher by 9.3 per cent compared to IPO forecasts, translating to DPU of 1.98 S-cents. The continued robust performance was driven by higher portfolio occupancies – MINT achieved a high of 94.3 per cent in 1Q12 – while its properties benefited from higher rental rates secured during renewals and recorded a high of S$1.52 psf pm on a portfolio basis. Renewals remain robust and positive – 99.3 per cent of leases expired were renewed at the maximum cap. New leases that were secured at market rates were also in excess of 20-40 per cent higher than expiring rents. Growth in the coming quarters will likely to hinge from: completion of the recent tender award of JTC portfolio likely in August 2011, with funding of this purchase yet to be announced; and ability to price renewals closer to market levels for remaining 13 per cent of topline to be renewed in the following three quarters of FY12, given the expiry of the rental caps recently. – DBS Vickers

OKP Holdings (BUY; Target Price: S$0.80)

2Q11 net profit of S$6.9 million was surprisingly strong – up 61 per cent YoY, This came on the back of slightly lower than expected revenues of S$28.3 million and was largely driven by expanding margins. OKP recorded gross margin of 39.4 per cent in 2Q11, compared to 26.7 per cent in 1Q11 and 16.5 per cent in 2Q10, as a result of revenue recognition from the higher margin design-and-build projects like the CTE expansion project. While the quantum of 2Q11 gross margin is one-off in nature and margins will normalise over the year, we still expect them to record better margins in FY11/12 compared to prior years as more design-and-build projects contribute. On the back of higher margin assumptions, we revise up our earlier conservative FY11/12 EPS (earnings per share) estimates by 19 per cent and 28.6 per cent, respectively. Our revenue projections are backed by OKP’s S$382 million gross outstanding orderbook and OKP has already secured about S$104 million of new orders. – DBS Vickers

OSIM International (BUY; Target Price: S$1.84)

OSIM reported a 55 per cent YoY jump in 2Q11 PATMI (net profit) to S$19 million, which were in-line with expectations with 1H11 PATMI of S$39 million, accounting for 53 per cent of our FY11F estimates. Looking forward we expect 2H sales to be driven by new product launches which includes uDivine Sport, uJazz, uPapa Music Synch and Zhi, an energy drink. As at June 30, OSIM has net cash of S$58.7 million. Its convertible bonds listed in July fetched S$120 million while its TDR listing, extended till 28 October 2011, is due to raise S$76 million. Coupled with net operating cash flows of S$20 million for the year, we should expect it to have S$300 million in cash by year end. It is currently trading at an attractive 15x/13x FY11/12F P/E (price earnings), below the average 18x its regional peers are trading at. We continue to like the stock for its strong stable of speciality brands in which it has dominant market positions in. – DMG Research

Singapore Post (HOLD; Target Price: S$1.14)

Singapore Post (SingPost) reported a 3.0 per cent YoY rise in revenue to S$142.3 million but saw a 3.5 per cent fall in net profit to S$39.2 million in 1QFY12, in line with our estimates. Revenue in all business segments (mail, logistics, retail) saw YoY growth, but operating costs (especially labour and related costs) were also higher. We have tweaked our estimates to take into account rising operational costs amidst the inflationary environment, as well as increasing contribution from the logistics business which generally has lower margins than the mail business. As such, our DCF (discounted cash flow)-based fair value estimate slips from S$1.21 to S$1.14. Meanwhile, the group has declared an interim dividend of 1.25 S-cents per share, in line with its usual practice. Maintain HOLD for SingPost’s decent dividend yield of 5.7 per cent, backed by its stable operating cash flows and strong financial position. – OCBC Investment Research

SMRT (HOLD; Target Price: S$2.04)

SMRT’s 1Q12 results came in within expectations, with revenue increasing 7.5 per cent YoY to S$253.1 million on the back of higher MRT and bus ridership and increases in external fleet maintenance revenue. However, EBITDA fell 5.4 per cent YoY due to larger staff related costs and the surge in fuel prices over the past year. As a result, overall net profit was lower by 8.9 per cent YoY at S$34.8 million. Going forward, SMRT warns that its FY12 profitability may not be maintained at FY11’s level as it expects cost pressures from higher staff and energy expenses to remain. We concur with this assessment and predict sluggish bottom line growth from train and bus operations on sustained cost pressures although we do see some offsetting effects from its rental segment. As the 1Q results were in line with our forecasts, we leave our FY12 estimates unchanged, and maintain our HOLD rating with an unrevised fair value estimate of S$2.04. – OCBC Investment Research