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Keppel Land (BUY; Target Price: S$4.00)

In January, KepLand said that it had acquired a 51 per cent stake in a prime commercial project in Beijing’s Chaoyang CBD, with an estimated breakeven of RMB20,000 psm GFA. After reviewing our earlier forecasts, we raise our capital value assumption for the office component to RMB50,000 psm, which suggests a RNAV accretion of 8 S-cents per share from the project instead of the original estimate of 4 S-cents per share. KepLand has withheld the launch of the remaining 322 units at The Luxurie in Sengkang. We reckon that management could be waiting for the adjoining site to be made available on the Confirmed List in April and make a bid for it. If successful, KepLand can dictate the near-term supply and pricing in the vicinity. If not, then the winning bid is likely to result in a project with a higher breakeven than that of The Luxurie, mitigating its own risks. Despite the slow turnover in the high-end residential market, KepLand has no intention of reducing asking prices just to move inventory. A prime example is Reflections at Keppel Bay, which received its Temporary Occupation Permit at the end of last year. KepLand has decided to retain about 130 of the 290 unsold units for corporate residences with a view to selling them only when the market picks up, just as it had done for 168 units at the Caribbean previously. – Maybank Kim Eng Research


Kingsmen Creatives (BUY; Target Price: S$0.76)

Kingsmen’s 4Q12 PATMI (net profit) grew 6.7 per cent YoY to S$6.0 million, on the back of a 48.4 per cent YoY surge in revenue to S$81.1 million. The results were in line with our estimates. Revenue growth was largely driven by its Interiors business. Its orderbook stands at S$106 million versus S$84 million a year ago. This reflects the confidence its customers have in its capabilities in spite of the ongoing global economic uncertainty. We remain positive on Kingsmen’s prospects, supported by the trend of more retailers turning towards Asia for growth and more theme parks sprouting up in Asia. Kingsmen declared a final dividend of 2.5 S-cents per share. Including the interim dividend of 1.5 S-cents per share, total dividend for FY11 was 4.0 S-cents, translating into an attractive yield of 6.5 per cent. – DMG Research


Midas Holdings (HOLD; Target Price: S$0.41)

As we had warned, Midas’s recent 4Q11 results were lacklustre. With China’s rail industry remaining sluggish, we are convinced that any turnaround in fortunes for Midas will likely come after this year. Revenue slipped by 19 per cent QoQ during 4Q11, a clear sign that delivery to customers had been painfully slow. With new capacity coming on-stream, inventory build-up in the quarter alone totalled RMB100 million. As the first quarter is seasonally weaker, we are already anticipating another disappointing quarter. Midas was awarded a “New High Tech Enterprise” tax status in China, enabling it to enjoy a concessionary tax rate of 15 per cent for three years versus a normal tax rate of 25 per cent. This propped up its profitability in 4Q11 as tax provisions fell significantly. Nanjing Puzhen Rail Transport (NPRT), its 32.5 per cent-owned associate, also swung around and was operating in the black again. NPRT has an orderbook of RMB7 billion but its execution has been too inconsistent to provide any clear visibility. Midas recently entered into a joint-venture agreement with Kaitong Engineering to focus on light aluminium alloy products for other industries, such as aviation and shipping. Kaitong, which is a privately-held local business group with myriad interests in China, will hold a 45 per cent stake via an equity injection of US$45 million. However, the gestation period for this JV will be long as it will be a greenfield project and contributions will start to flow in after 2015. Our FY12 earnings estimates are significantly below the consensus, which we deem to be too optimistic. Midas has a current orderbook of RMB800 million, but this may be quickly depleted if it fails to secure any major contract wins this year. – Maybank Kim Eng Research


ST Engineering (BUY; Target Price: S$3.32)

ST Engineering (STE) Tuesday morning halted trading of its shares and also put out an announcement in response to a bribery scandal in India. According to an Aviation Week story dated 5 March 2012, the Indian Ministry of Defence (MoD) has blacklisted six defence firms, including STE’s subsidiary ST Kinetics (STK), from doing business in India over the next 10 years. The MoD’s decision was based on evidence related to illegal gratification to officials, including Sudipto Ghosh, the former Director General of India’s Ordnance Factory Board (OFB). In its announcement, STE maintains it is a law-abiding group and will now seek legal advice so as to clear its name of any shenanigan. Furthermore, despite media reports of the blacklisting, STK has not received any official notification from the Indian authorities on this matter. In fact, in all the previous court hearings and affidavits filed, the MoD repeatedly said STK was only temporarily suspended, but not blacklisted, as an arms vendor to India. The court hearings were the result of three petitions STE filed with the Delhi High Court in March 2011 to seek clarification on the alleged blacklisting. According to STE, STK has never won any defence contract or exported defence sales to India. STE also understands that developing defence sales to India will be a long process and has not included any expected sales to India’s MoD in its FY12 guidance. Thus, the group expects this blacklisting to have no financial impact on the group’s financial performance and maintains its FY12 guidance. Since this matter has no financial impact on STE, coupled with STE’s vigorous insistence of its innocence, we maintain our BUY rating and fair value estimate of S$3.32/share on STE. – OCBC Investment Research


Wheelock Properties (Not Rated)

Wheelock Properties (Singapore) announced that its CEO David Lawrence had passed away on 4th March 2012, at age 65. The company also placed on record the outstanding and significant contributions made by the late David Lawrence to the group. When Lawrence first took over as MD in 1996, Wheelock (then known as Marco Polo Developments) was a smallish developer with a hotel (Marco Polo Hotel) and a commercial property (Lane Crawford). Over the years, under his charge, shareholders’ funds grew from S$500 million to S$2.9 billion over a 15 years period, representing a compounded growth of 12 per cent in NAV p.a., handily beating its peers in the sector. Lawrence’s keen sense of the property cycle and ability to time the market well was instrumental to this track record. At the same time, he successfully established Wheelock as a developer with a strong brand for prime quality projects. Using the billion dollars profits made from its Ardmore Park project, Wheelock went on to acquire a string of residential sites on the eve of a property upturn, launching a series of luxury projects from the Grange Residences, The Seaview, Cosmopolitan, Ardmore II to Scotts Square. Scotts Square alone probably contributed another billion dollar of pretax profits if one were to include the revaluation gains from its retail component. Today, the company is in good shape with net cash topping a billion dollars. Internally, 2 executive directors could fill the role of David Lawrence, Ms Tan Bee Kim and Mr Tan Zing Yan. – DMG Research