Asia Pacific Equity Research | Singapore

MARKET

PULSE
Key Idea
Chg 11.0 1.5 0.9 -0.5 -2.4 -328.6 243.4 % Chg 0.3 0.8 0.1 -0.1 -0.5 -11.1 16.0

Morning Call 13 May 2013

Key Singapore Indices Close 3443.8 183.5 901.8 844.0 542.0 2630.6 1768.0

STI Catalist Finance Property Electronics Vol(m) Val(S$m)

World Indices Close 15118.5 3436.6 1633.7 6625.0 1772.4 23321.2 14607.5 1622.5 1944.8 8280.3 Chg 35.9 27.4 7.0 32.2 6.3 109.7 416.1 1.4 -34.7 -5.6 % Chg 0.2 0.8 0.4 0.5 0.4 0.5 2.9 0.1 -1.8 -0.1

Dow Jones Nasdaq S&P500 FTSE KLCI Hang Seng Nikkei SET KOSPI TWSE

ECS Holdings: Double-digit growth delivered ECS Holdings (ECS) reported a positive set of 1Q13 results which exceeded our expectations. Estimated core PATMI jumped 28.6% YoY to S$8.5m on the back of a 20.9% YoY increase in revenue to S$1,090.3m. The group managed to record healthy YoY revenue and EBIT growth for all of its core segments. However, its gross margin slipped 0.4ppt to 3.7% in 1Q13 due largely to a change in product mix. We lift our FY13 and FY14 revenue projections by 8.9% and 10.6%, respectively. But as we also lower our margin assumptions slightly, our FY13 and FY14 core PATMI estimates are raised by a smaller magnitude of 4.2% each. Correspondingly, our fair value estimate increases from S$0.53 to S$0.57, now pegged to 6x FY13F EPS (previously 5.8x). As ECS is trading at an attractive 5.0x and 0.52x FY13F PER and P/NTA, respectively, we upgrade the stock from Hold to BUY. More reports: - UOL Group: Proposed delisting of Pan Pacific Hotels - Midas Holdings: Expects net loss in 1Q13 - Biosensors International Group: Proposed acquisition of assets from Spectrum Dynamics News Headlines Two shareholders in See Hup Seng have called for an EGM to remove the managing director from the board and return the founder and ex-chairman of the company to the boardroom. The combined profits of companies listed on the SGX trended lower in 1Q13. As of Friday, the 206 companies with 1Q earnings reported a combined profit of about S$6.48b, down 8.4% YoY. China's new local-currency loans exceeded estimates last month while money supply expanded at a faster pace, a sign policy makers are maintaining credit support for the economy after 1Q growth unexpectedly slowed. Italian Prime Minister Enrico Letta warned that the future of the government was at risk following a furious row over Silvio Berlusconi's attacks on magistrates in a rally at the weekend. A dual-track system, including survey-based lending rates along with transaction-linked indices, is likely to replace scandal-hit LIBOR as soon as next year, the Financial Times reported.
Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

Market Statistics (SG) STI No. No. No. 52-week range of gainers of losers of unchanged 2,699 3,445 322 226 191

Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$) 1.2 101.9 0.4 0.3 95.7 0.0 0.3 0.0 0.0 -0.3

Research Team (65) 6531 9800 e-mail: info@ocbc-research.com

Please refer to important disclosures at the back of this document.

MICA (P) 039/06/2012

OCBC Investment Research Market Pulse 13 May 2013

ECS Holdings: Double-digit growth delivered 1Q13 core PATMI jumps 28.6% YoY Cheap valuations Upgrade to BUY 1Q13 results above expectations ECS Holdings (ECS) reported a positive set of 1Q13 results which exceeded our expectations. Revenue rose 20.9% YoY to S$1,090.3m, forming 28.2% of our full-year forecast. PATMI jumped 34.2% YoY to S$8.3m. Excluding forex and other exceptional items, we estimate that ECSs core earnings rose 28.6% YoY to S$8.5m, constituting 25.6% of our FY13 forecast despite 1Q being a seasonally weaker quarter. Growth recorded for all core segments ECS managed to record healthy YoY revenue and EBIT growth for all of its core segments despite the general malaise in the PC market. This was due to its focus on driving sales of mobile devices such as smartphones and tablets from major IT vendors, as well as enterprise systems products. We believe that one of the key drivers in 1Q13 came from a full quarter of contribution from ECSs distribution of Apples iPhone 5 in China, especially in the second tier cities such as Chengdu. Other major IT vendors which aided ECSs growth include Lenovo and Oracle. However, due to the change in product mix as a result of higher contribution from the lower margin mobile devices, ECSs gross margin slipped 0.4ppt to 3.7% in 1Q13. Raise forecasts and upgrade to BUY We lift our FY13 and FY14 revenue projections by 8.9% and 10.6%, respectively. But as we also lower our margin assumptions slightly, our FY13 and FY14 core PATMI estimates are raised by a smaller magnitude of 4.2% each. Correspondingly, our fair value estimate increases from S$0.53 to

S$0.57, now pegged to 6x FY13F EPS (previously 5.8x). Coupled with a forecasted FY13 dividend yield of 4.7%, total potential returns equates to ~22%. ECS is currently trading at 5.0x and 0.52x FY13F PER and P/NTA, respectively, which we view as an attractive entry point. Therefore, we upgrade ECS from Hold to BUY. (Wong Teck Ching Andy) . . . . .

UOL Group: Proposed delisting of Pan Pacific Hotels 1Q13 numbers in line Proposed PPHG delisting Still cautious on resi. sector 1Q13 PATMI down 17% at S$77.7m UOLs 1Q13 PATMI decreased 15% YoY to S$71.7m mostly due to a weak contribution from its hotel segment (listed hotel subsidiary PPHG saw its 1Q13 PATMI dip 45%% to S$9.5m). 1Q earnings now make up 19% of our full-year forecast, which we judge to be generally within expectations and is tracking marginally below due to lumpy progress recognition at development projects. Proposal to delist Pan Pacific Hotel Group The group has made a cash offer of S$2.55 per share to delist PPHG (Pan Pacific Hotels Group), conditional on the shareholder approval. The offer price represents a 9% premium over PPHGs last transacted price of S$2.34 and gives shareholders, in UOLs view, a reasonable exit alternative which may not be available given low trading liquidity and free float (UOL owns 81.57% and UOB 7.99%). We see this as a sensible move which would consolidate the groups hotel assets at a fairly reasonable price, given our estimated RNAV of S$2.80 for PPHG. That said, from our discussions with management, it appears unlikely that material operating changes, i.e., a major re-structuring or REIT listing, are in store. Still cautious on residential sector UOL remains cautious on the residential sector and are more likely to replenish land than to land-bank aggressively. Going forward, it looks to launch its Bright Hill (445

OCBC Investment Research Market Pulse 13 May 2013

units) and St Patricks Garden (186 units) projects in 2H13. The group also recently won a new GLS site at Sengkang West Way at S$262.1m which is expected to yield 550 homes. In addition, UOL reports precommitment levels at the One KM mall to be around 55%. Maintain HOLD with higher S$7.16 fair value We see mid-term catalysts to be upcoming launches at Bright Hill and St. Patricks and see PPHGs potential privatization as a mild positive for the stock. Maintain HOLD with a higher fair value estimate of S$7.16 (20% RNAV disc.), versus S$6.01 previously, as we work into our valuation model higher prices of listed holdings and the Sengkang acquisition. (Eli Lee) . . . . .

Biosensors International Group: Proposed acquisition of assets from Spectrum Dynamics Biosensors International Group (BIG) announced this morning that it has entered into an agreement to acquire substantially all the assets of Spectrum Dynamics (SD), which is a privately held company. SD is a medical imaging and clinical applications company involved in the designing, developing, manufacturing and distribution of medical imaging systems and technology in multiple fields. The initial deal consideration is US$51.1m (book value of SDs assets valued at ~US$7.3m as at 31 Mar 2013), and will be funded by internal resources. Subsequent performance payments of US$4m and US$15m may be paid to SD if certain performance benchmarks are met in 2014 and 2016, respectively. We are positive on this move as it allows BIG to diversify its product offerings and revenue stream. But as the acquisition is not expected to have a material impact on the EPS and NTA of BIG in FY14, we leave our forecasts unchanged for now. Maintain BUY and S$1.60 fair value estimate on BIG. (Wong Teck Ching Andy) . . . . .

Midas Holdings: Expects net loss in 1Q13 Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 1Q13 results release, saying that it expects to report an unaudited net loss. This is mainly due to lower revenue and gross profit margin given the change in product mix and weaker utilisation rates, as well as higher operating expenses and finance costs and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). This profit guidance comes as no surprise to us as we had forecasted Midas to record a net loss of CNY3.2m in 1Q13. We still expect Midas to stage a recovery in 2H13, but the strength of this recovery will be dependent on the developments in Chinas high-speed railway sector. Midas will report its 1Q13 results on 14 May after trading hours, while an analyst conference call has been scheduled the day after. We will provide more updates then. For now, we have a BUY rating and S$0.595 fair value estimate on the stock. (Wong Teck Ching Andy) . . . . .

OCBC Investment Research Market Pulse 13 May 2013

Calendar of key events

13-May-13
Viz Branz 3Q13 results Golden Agri/Armstrong 1Q13 City Dev/SBS Transit/Super Group 1Q13 Superbowl 1Q13 China Apr Ind Production China Apr Retail Sales US Apr Adv Retail Sales

14-May-13
Noble/Vard/Midas 1Q13 UEEC/Comfort Delgro 1Q13

15-May-13
SATS/SingTel FY13 Sino Grandness/Petra 1Q13 Hong Leong Asia 1Q13 Swiber/China New Town/Hiap Hoe 1Q13 Olam 3Q13 US Apr Industrial Production

16-May-13
SIA FY13 US Apr CPI US Apr Housing Starts US May Philadelphia Fed

17-May-13
Tiger FY13 SG Apr NODX US May U of Michigan Confidence

20-May-13

21-May-13

22-May-13
TPV 1Q13 US Apr Existing Home Sales

23-May-13
GLP FY13 SG Apr Industrial Production SG Apr CPI US Apr New Home Sales

24-May-13
US Apr Durable Goods Orders

27-May-13

28-May-13
Tat Hong FY13

29-May-13

30-May-13
US 1Q GDP

31-May-13
SG Apr Bank Loans & Advances China May Mfg PMI (1st Jun) US May U of Michigan Confidence

03-Jun-13
China May Non Mfg PMI US May ISM Mfg

04-Jun-13
US Apr Trade Balance

05-Jun-13
US 1Q Nonfarm Productivity US Apr Factory Orders US May ISM Non Mfg Composite

06-Jun-13

07-Jun-13
China May Exports YoY (8th Jun) China May Imports YoY (8th Jun) China May Ind Production (9th Jun) China May Retail Sales (9th Jun) US May Chg in Nonfarm Payrolls US May Unemployment Rate

10-Jun-13

11-Jun-13

12-Jun-13

13-Jun-13
US May Advance Retail Sales US Apr Business Inventories

14-Jun-13
SG 1Q Unempolyment Rate (15 Jun) SG Apr Retail Sales US May Industrial Production US Jun U of Michigan Confidence

Notes:

All US Tech results dates have been adjusted to Singapore dates. US Initial jobless claims are released every Friday. MBA mortgage applications are released every Wednesday.

OCBC Investment Research Market Pulse 13 May 2013

SHAREHOLDING DECLARATION:

For shareholding disclosure on individual companies, please refer to the latest reports of these companies.

DISCLAIMER FOR RESEARCH REPORT

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally.

Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither given nor endorsed.

RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

Co.Reg.no.: 198301152E

Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd