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City Developments Limited (HOLD; Target Price: S$11.24)

City Developments (CDL), Hong Leong Group and Hong Realty beat six other bidders with a top bid of S$396 million or S$754 psf ppr for a plum site located along Alexandra Rd. The 107,129 square feet site has a total GFA of 524,934 sf and can potentially house 545 units. The winning bid is 9 per cent higher than the second (Tanglin Land, S$692 psf ppr) and 25 per cent higher than the lowest bid (IOI Properties, S$606 psf ppr). Other participants included Keppel Land (S$647 psf ppr) and a consortium involving F&N (S$646 psf ppr). The keen interest seen is largely due to its city fringe location and proximity to Redhill MRT station. Bid is fair, estimated selling price of the end product in line with recent transactions. We expect breakeven cost to be around S$1150-1250 psf and the project should generate a

15 per cent profit margin if sold at S$1,400 – $1,500 psf. Recent transacted prices for the adjacent Ascentia Sky project developed by Wing Tai range between S$1,380 and S$1,573 psf. We estimate this project could potentially add 2-3 S-cents to CDL’s RNAV. – DBS Vickers

ComfortDelgro (BUY; Target Price: S$1.75)

CD’s FY13 PATMI (net profit) could increase by 4 per cent if taxi rental fees are raised. ComfortDelGro (CD) is revising its taxi fare structure effective 12 December 2011 and this will include raising basic fares, extending the duration of “peak hours” and lowering peak hour surcharges. Though the actual impact is difficult to quantify, we estimate taxi commuters’ fares to increase by 10 per cent. Assuming CD increases its rental rates by 2 per cent in 2QFY12, CD’s FY13 PATMI will be 4 per cent higher than our base case. However, CD has not commented on increasing its taxi rental rates to drivers and so we are leaving our estimates unchanged. As the leading taxi operator with 60 per cent market share, we believe CD’s competitors will follow suit and revise their taxi fare structure as well. – DMG Research

Etika International (NEUTRAL; Target Price: S$0.28)

Excluding negative goodwill, 4QFY11 PATMI (net profit) broke-even, making marginal gains, compared to profits of RM2.9 million in 3QFY11 and RM17.5 million in 4QFY10 due to steep rises in costs of raw materials as well as time lag between selling price hikes and rising raw material costs. Core business FY11 PATMI fell 72.2 per cent YoY to RM18.4 million, below our expectations of RM25.8 million, due to weaker performances from all business units, particularly Dairies, which saw a 45.8 per cent decline in PAT, and RM3.8 million losses in Frozen Food. A final dividend of 0.7 S-cents per share has been declared. Etika is expected to benefit from growing consumption of liquid-dairy products, particularly with the expansion of middle income class in Asia. However, the stubbornly high raw material costs as well as higher operating costs for the expansion of distribution network in existing and new export markets are expected to pressure GPM (gross profit margin) and the bottomline in the short to medium term. We are expecting core earnings to dip 1.6 per cent (FY12F) followed by growth of 73 per cent (FY13F), lifted by higher profits or turnaround of newly acquired businesses and capacity expansion. – NRA Capital

Olam International (OUTPERFORM; Target Price: S$3.17)

We expect Olam to outperform its peers as investors come to appreciate its earnings resilience amid macroeconomic uncertainties. While industry players have been caught by gyrating commodity prices and slowing demand, Olam has continued to lift its earnings, volume and margins. A defensive portfolio, comprising mainly demand-inelastic edibles, is a desirable trait, especially in uncertain times. We believe recent fears of potential cotton impairments have been overplayed. The worst should be over as cotton markets are back in contango. Olam was not spared from industry-wide defaults, but these had been accounted for in 4QFY11 and 1QFY12. Its cotton division remained profitable throughout and we do not expect a resurgence of the same problems. We believe Olam is in a position to capitalise on M&A opportunities amid industry consolidation, thanks to its strong balance sheet and access to Asian sources of funding. – CIMB

Riverstone Holdings (Not Rated)

In 3Q11, Riverstone recorded a 29.8 per cent YoY rise in revenue to RM71.0 million, attributed to higher production volume from additional production lines. However, gross margins contracted by 9.8 percentage points YoY, reflecting escalating raw material costs and the depreciating US dollar. Raw material prices have experienced record-highs in the first half of the year. Since then, prices for nitrile fell by 46 per cent from their peak and latex slipped by 38 per cent. This coupled with a rally in the US dollar against the ringgit will be fully reflected in 1Q12.  A few of Riverstone’s customers in Thailand, such as HDD maker Western Digital, were affected by the Thai floods and had temporarily suspended orders. The firm was quick to divert its orders to new customers and avoid any excess inventories. Its Thai plant still operates at almost full capacity, accounting for 15.1 per cent of its FY10 revenue. Riverstone is expected to record higher production volume from the completion of an additional single line this month. Another single line will be added in 1Q12 to maintain its expansion momentum, bringing its total annual capacity to 2.5 billion gloves. The company plans to add more lines to its existing factories in the coming year. The company is expected to continue to pay out at least 45 per cent of its profits. According to Bloomberg consensus, the stock is trading at forward PER (price earnings ratio) of 8.1x, largely in line with its competitors’ 9.3x. – Kim Eng Research

Singapore Telecommunications (NEUTRAL; Target Price: S$3.13)

At SingTel’s 2011 RMID, the senior managements of 6 subsidiaries and associates – Singtel Singapore, Optus, AIS, Telkomsel, Bharti and Globe – addressed analysts in parallel breakout sessions. The event’s overriding themes were on data, specifically: the trend towards new converged services on the NBN in Singapore and Optus, the use of 3G networks to drive data uptake in the under-penetrated markets of Indonesia and India (Telkomsel/Bharti); and emerging data play with new network investments in nascent 3G markets (Thailand/Philippines). Group-wide trials on LTE have been successful, with Optus rolling out its LTE network in 2Q12. SingTel showcased its NGN services/applications across multiple platforms and cloud services on the sidelines of the event, which made a good impression on us. We believe that concerns of its competitors taking a chunk of its lucrative enterprise customers under the NGN are overdone as the group appears to have pre-empted competition well via the up-selling of services and more competitive pricing to migrate customers. – DMG Research