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Ascendas REIT (HOLD; Target Price: S$2.14)

A-REIT announced the acquisition of 2 buildings in Singapore – 2 Corporation Place and 3 Changi Business Park Vista – for a total consideration of S$179 million. Located within Jurong Lake District and Changi Business Park respectively, the acquisitions will further deepen their already established presence within the 2 industrial hubs. The properties are multi-tenanted buildings housing quality tenants such as MNCs involved in a variety of valued added sectors like IT, Electronics and engineering. Initial yields for the properties are estimated to be in the range of 7.0 per cent, higher when compared to its implied trading yield of close to 6.25 per cent. The properties will be funded by debt – gearing as of September 2011 is 31.5 per cent and is expected to head to 37.5 per cent after accounting for all its capex requirements by end 2013. We have revised our estimates slightly up by 0.7 per cent in FY13 as we incorporate the acquisition in our numbers. In addition, we see potential upside at 2 Corporation Place, which is only 80 per cent occupied currently. While we remain cautious on the outlook of Business Parks/Hi-tech space performance in the immediate term, we acknowledge the longer term benefits of having an increasing exposure in these 2 established hubs. This allows A-REIT to offer new/existing tenants a variety of space choices in these locations. – DBS Vickers

FJ Benjamin (HOLD; Target Price: S$0.33)

Consumer sentiment is expected to weaken, hence we are turning cautious on FJB’s mid-term outlook. As a regional mid-to-high end fashion and apparel distributor and retailer, we believe FJB will be sensitive to changes in consumer demand. The 2012 outlook for GDP growth globally is now largely lower than when we first initiated coverage of FJB in August this year. 1Q12 results met our expectations, supported by contributions from HK timepieces. We will be keeping tabs on FJB’s performance over the seasonally stronger 2Q12 (Christmas shopping and year-end holiday season) as well as retail sales generally, as an indicator to 2H12’s performance. We believe consumer sentiment will weaken on expectations of slower economic growth, and we expect discretionary spending to be affected. Management is targeting for 190 stores by FY12F vs 165 currently. However, we believe this to be aggressive. Given the poorer regional economic outlook, we are reducing our earnings expectations for FY12F/FY13F by 11 per cent/12 per cent. – DBS Vickers

Goodpack Limited (BUY; Target Price: S$1.70)

Since our last report issued on November 14, the share price of Goodpack has fallen by almost 21 per cent. Most of the price correction came on the back of broad market sell-offs following the weak macro-economic conditions. Going forward, however, we deem any declines to be unwarranted. Its main revenue segment, the natural and synthetic rubber business, remains as stable as before, while the company has also managed to finally procure an account within the automotive industry. Maintaining our FY12 earnings forecasts, we note that Goodpack is now trading close to one standard deviation below its historical average, which – coupled with the fact that company has initiated share buybacks –should provide some interim support. We upgrade our call to BUY on valuation grounds with an unchanged fair value estimate of S$1.70. – OCBC Investment Research

Hock Lian Seng (Not Rated)

Last month, HLS bought an industrial site along Gambas Avenue that was put up for sale under the Government Land Sales (GLS) programme. Its tender price, in terms of per square foot, was the lowest when compared with nearby GLS transactions this year. The 60-year leasehold light industrial site at Woodlands is able to yield 576,592 square feet of GFA. Assuming a construction cost of S$175 per square foot, the estimated breakeven for HLS is around S$330 psf. New industrial units in the area are asking for prices in the region of S$380 psf, implying a potential pre-tax profit of S$30 million. But we do expect there will be some competition from nearby Woodlands 11 and the two industrial sites that were sold earlier this year. The 21.5km-long NSE is the 11th expressway in Singapore and will serve the north-south corridor from Woodlands to the city centre. Unlike other construction projects, local infrastructure works are dominated by foreign companies. With HLS’s track record as the only local player to have secured a contract for the Marina Coastal Expressway (MCE), it should have an edge when vying for the upcoming NSE project, which is expected to open for tender next year. The overall cost of NSE has been estimated at S$6-7 billion. HLS’s orderbook stood at S$255 million as at end-3Q11, down from S$409 million a year ago. No new contracts were secured during the period and hopes for Downtown Line Stage 3 contracts were dashed when 17 out of 18 contracts were awarded to foreign companies. However, we expect the construction contract for the industrial project at Gambas Avenue, estimated to be about S$100 million, to be undertaken by HLS. – Kim Eng Research

United Overseas Bank (SELL; Target Price: S$14.20)

While mortgages account for about 30 per cent of UOB’s Singapore loan portfolio (about in line with peers of around 25 per cent for DBS, 30 per cent for OCBC), the bank has a higher 90 per cent exposure to private residential properties, which is a segment that is likely to be harder hit by the government’s recent imposition of the additional buyer’s stamp duty. On an annualised basis, UOB has posted faster housing loan growth of 20 per cent as at end-September 2011 and we expect the new measure to take some wind out of loan expansion. As it stands, we have already imputed slower loan growth out of Singapore of 7 per cent for 2012 vs 24 per cent in 2011 for UOB and it remains to be seen if further trimming is necessary, especially since property development loans make up another 10-20 per cent of total loans. At 9.4 per cent of shareholders’ funds, UOB’s eurozone exposure is likely to remain a drag on sentiment relative to peers, in our view. To recap, UOB’s total European debt exposure stood at S$2.1 billion as at end-September, a tad lower than DBS’s S$2.4 billion. The difference, however, is that while DBS’s exposure to European banks is just S$211 million, or 0.7 per cent of shareholders’ funds, UOB’s European bank exposure is S$1.2 billion, which is a larger 5.4 per cent of shareholders’ funds. – Kim Eng Research