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BBR Holdings (BUY; Target Price: S$0.38)

4Q11 earnings came in within our expectations at S$2.9 million. Revenue was up 55.7 per cent YoY, mainly attributable to revenue progressively recognised for sold units from its property development Lush on Holland Hill and the various on-going construction projects in their active stage of construction. While gross profit margin was being impacted by rising cost of raw materials (such as concrete and steel) and labour and eased 8 percentage points from 18.9 per cent in 4Q10 to 10.8 per cent this quarter, it appears to be stabilising – inching up 2.4 ppt from 8.4 per cent in 3Q11. FY11 earnings came in at a record S$20.1 million. BBR’s orderbook grew an admirable 22.2 per cent within a quarter and remains healthy at S$590 million. It comprises mainly of civil engineering and building contracts in Singapore and Malaysia that will be fulfilled by 2015. Some projects up for grabs currently include HDB projects and the construction of new schools. With the aggressive rollout of public housing and infrastructure projects by the government, we believe BBR’s strong track record would put it in good stead for more contract wins, thereby boosting its orderbooks.One of BBR’s property development project, Lush on Holland Hill, is expected to continue boosting construction earnings in FY12. We estimate pre-tax earnings of S$6.4 million to be derived from the project. Apart from Lush on Holland Hill, BBR has launched another project at Simon Lane – Bliss @ Kovan. Construction for this project is targeted to commence in August 2012. With BBR’s continued focus on property, the company is on the look-out to acquire additional landbank. – DMG Research


Capita Commercial Trust (NEUTRAL; Target Price: S$1.38)

The recent purchase of Twenty Anson is expected to add 0.36 $-cent to the DPU (dividend per unit) while the price of S$430 million being paid is viewed as fair-valued. Currently, this property is generating a yield of 2.6 per cent with a potential to be increased to 4 per cent when CCT revise the rental rate to the average market rate of S$8.44 psf/month from its current S$6.18 psf/month when 50 per cent and 44 per cent of the property’s NLA is due for renewal in 2013 and 2014 respectively. Occupancy rate in Six Battery Road fall to 85.4 per cent in FY11 from 99.7 per cent the year before. Going forward, occupancy is expected to fall with one of its anchor tenant moving out when the lease is due. The occupancy rate at this property is expected to remain volatile until 2013 when the AEI is scheduled to be completed. Going forward, the positive rental reversion brought about by some of CCT’s properties (e.g. HSBC building) are expected to be offset by the loss in income due to lower occupancy rate in some of its other properties. In addition, with a softer economic forecast in Singapore for 2012, we expect to see strong positive reversion to occur only in 2013. Given limited room for growth in near term on the back of weak economic forecast, we maintain NEUTRAL on this counter at this juncture. – DMG Research


CDL Hospitality Trusts (BUY; Target Price: S$2.00)

The development charge (DC) rates announced on last week saw an average increase of 15 per cent for Hotels. We think this is worth mentioning as the next largest average increase was only 6 per cent (Commercial), all other groups saw no changes, except for the 3 per cent decrease for non-landed Residential. The DC rate hike rates could have incremental impact on future hotel supply by increasing development costs. As an incumbent with 2,000 rooms in six high-end hotels in Singapore, including Orchard Hotel and Grand Copthorne Waterfront, CDLHT has an edge over potential entrants. The significant DC increase has marginally driven up the replacement cost of hotel rooms and thus would have a positive valuation effect on hotels and also on CDLHT. As we have identified in our previous report, there are three hotels being developed by City Developments Ltd (CDL) which CDLHT could consider acquiring. These hotels should be opening over 2012 to 2015 and are not subject to the new DC increases. Through this, CDLHT has some cost advantage over other hotel companies which do not have a developer parent or associate that has already gotten provisional permission for the development of new hotels. As a liquid counter with an existing supply of high-end hotels, and a developer parent with a potential pipeline unaffected by the new DC hike, CDLHT is well-placed to benefit from the still-growing tourism industry. – OCBC Investment Research


Indofood Agri Resources (BUY; Target Price: S$2.42)

Stripping away fair value gains of biological assets and FX gains, 4Q11 earnings was within our expectations. Core earnings in 4Q came in at Rp322 billion, down 25 per cent YoY, largely attributable to higher MI upon listing of PT SIMP, higher third-party FFB purchases, higher wages and fertiliser costs. 4Q11 revenue was up 6.9 per cent YoY, hitting Rp3.2 trillion on the back of higher sales volume of CPO, partially offset by lower asp of palm products. FY11 core earnings grew 13 per cent YoY to Rp1.4 trillion, up from Rp1.2 trillion a year ago. This was largely on the back of a 32.9 per cent jump in revenue with higher sales of plantation crops and edible oils and fats products, but partially offset by a 3 ppt decline in gross margins. If the right deal comes along, IFAR may spend up to US$400 million (includes borrowings) acquiring new agri businesses. Potential targets are likely to be brownfield projects, located along the equatorial belt like South America, Africa and Asia and are involved in palm, sugar or rubber. Driven by strong domestic demand for branded cooking oil, sales of the edible oil and fats segment jumped from Rp6.6 trillion in FY10 to Rp9.1 trillion in FY11. On the expected continuation of the strong performance of that segment, we have raised our FY12 earnings forecasts by 15.1 per cent, mainly on the back of higher volumes from edible oil and fats and an increase in sugar prices. We now expect IFAR’s FY12 and FY13 earnings to come in at Rp1.5 trillion and Rp1.7 trillion respectively. – DMG Research


Singtel (BUY; Target Price: S$3.69)

SingTel will be adopting a new organisation structure from 1 April 2012, where it will divide its business into three segments – Group Consumer, Group Digital Life and Group ICT. Headed by Paul O’Sullivan, Group Consumer aims to be the leading provider of next generation communication, infotainment and technology services. Group Digital Life, headed by Allen Lew, seeks to become a leading player in the digital ecosystem, complementing the group’s consumer offerings with state-of-the-art digital services through bundles and add-ons. Lastly, Group ICT, which Allen Lew will temporarily be the covering CEO, brings together all enterprise-related business units and focuses on providing Infocomm Technology solutions to the group’s enterprise customers. Separately, SingTel announced that it will wholly acquire US-based mobile advertising solutions provider Amobee Inc for US$321 million cash. SingTel believes that the mobile advertising market is “nascent” and has “significant potential” for mobile operators, and acquisition will allow SingTel to capture the mobile advertising growth in both developed and emerging markets. While revenue contributions of just US$30 million per year are relatively insignificant, SingTel is confident that it can leverage on its existing 400 million customer base to quickly scale up the business. SingTel intends to finance the deal with internal resources. However, management stressed that it will remain financially prudent by striking a balance between achieving growth and creating value for shareholders. SingTel also reiterates its policy of a 55-70 per cent dividend payout ratio. – OCBC Investment Research


Thai Beverage (Not Rated)

Apart from paying corporate income tax of 30 per cent, ThaiBev also pays an excise tax on alcoholic beverages. In 2007, the Thai government approved excise tax hikes on compound spirits and brandy, which negatively affected the profitability of the group’s largest revenue contributor. The group must also pay an additional amount of 1.5 per cent of tax for advertising to raise public awareness about alcohol use. ThaiBev recently acquired a 64.66 per cent equity interest in Serm Suk Public Company, a manufacturer and bottler for PepsiCo products in Thailand, for THB9,971.5 million. It took out a set of 3-5-year loans with repayment to begin three years from now. The acquisition will help transform its non-alcoholic beverage business from simple distribution to neighbourhood stores and supermarkets currently to bulk-selling, thereby achieving economies of scale. To strengthen the image of its flagship product, Chang beer, ThaiBev has signed a three-year marketing pact with Real Madrid and Barcelona football clubs in Southeast Asia. In 4Q11, the group launched a new beer brand called Chang Export, priced at a 10 per cent premium over its current brands. Chang Export is expected to become a major contributor to the turnaround of the group’s beer business in the future. In the latest quarter alone, 22 million litres of Chang Export were exported compared to 10 million litres for the year for Chang Draft. ThaiBev has consistently paid out 60-83 per cent of its earnings over the past several years. Its FY11 DPS (dividend per share) of THB0.22 implies a 3.0 per cent yield. The counter currently trades at a steep discount to its peers’ 24x historical PER (price earnings ratio). – Maybank Kim Eng Research