In Focus
MARKETS & INVESTING | Krisana Gallezo-Estaura, Singapore

Singapore Stock Market to trade range this week

EXCLUSIVE: The market will more likely to trade range this week as US strong economic performance may not be able to offset lingering concerns over China’s another round of policy tightening, according to experts.

 Technical-wise, a push beyond either of last week’s Wednesday high and low Straits Times Index (STI) at 3,179 and 3,133 respectively must first be seen before the market sees more directional impetus, said Phua Ming-weii, analyst at Phillip Securities Research.

Singapore fell 0.18 per cent, or 5.62 points, to close 3,153.30 last Friday amid news that China's consumer price index rose 5.4 per cent in March - the fastest pace since July 2008. It fell within last Wednesday’s trading range for the past two sessions.

Phillip's Ming-weii said that a push beyond last Wednesday’s high and low will take the STI to resistance at 3,187 and support at 3128, breakout levels seen on April 4-8 trading.

“Until we see a push past the breakout levels of high and low STI at 3,179 and 3,133, respectively, technicals tell us that price is likely to continue ranging,” said the analyst.

“In the short term, a strong directional move in the S&P 500 or Shanghai Composite could serve as catalysts to give the STI more direction,” added Ming-weii.

Shanghai gained 0.26%, or 7.89 points, to close at 3,050.53 despite China's inflation at its highest for more than two and a half years


Capitaland Development: Buy

CapitaLand (CAPL) announced it would acquire a 40% stake in Surbana for S$360m to accelerate the growth of its value-housing segment. Surbana has deep expertise in mass-market residential developments and runs two core business segments: consulting and Chinese township development. For this acquisition, Surbana’s consulting business was valued around 6x earnings and its townships at an average RMB1.1-1.2k per sqm per pr, which are reasonable prices in our view. We view this acquisition as a positive one as it would bring Surbana’s experienced team into CAPL’s framework. This acquisition also underlines CAPL’s ambition for its value-housing business; we think a sizable component of CAPL’s planned growth in Chinese exposure to 45% of assets will come from CapitaValue Homes. We update assumptions and add S$0.02 to CAPL’s RNAV due to these four townships. Maintain a BUY rating with a revised fair value of $4.12 (at parity to RNAV) versus $4.10 previously. – OCBC Investment Research

Lian Beng Group: Buy

Lian Beng Group’s (LBG) 3QFY11 earnings were in-line with our estimates after stripping away one-off gains. We raise our FY11 and FY12 earnings by 7.5% and 12.4% respectively, on the back of higher other income and gain from sale of investment property. LBG is set to ride on Singapore's current building boom, from both public and private projects and its ventures in private residential and industrial developments will help boost its bottom line. Despite the 14% run up in price since our initiation last week, it still trades at 4x prospective P/E - way cheaper than its peers. Maintain BUY on a higher TP of S$0.67 (86% upside), based on a target P/E of 7x FY11/12 blended earnings. – DMG Research

Overseas Union Enterprise: Buy

OUE adds another iconic 320-room hotel into its hospitality portfolio in Singapore with an acquisition of 100% stake of L.C. Airport Hotel Pte Ltd, the owner of the Crowne Plaza Changi Airport Hotel, for S$250 mil, or $781k per room. We believe the property, completed in 2008, is of good quality given the relatively new building structure, quality furnishing, as well as an established hotel operator. There is little competition in the vicinity, with Ambassador Transit Hotel being the only other hotel available in the airport compound, which is targeting only the transitory travelers within the transit lounge. We factor in the value of the new acquisition and increase its total debt following the issuance of $300 MTN on 15 April 2011. As a result, RNAV remains unchanged at $4.13. We have not included the potential value accretion from the proposed extension plan to the new acquisition pending concrete building plan and the relevant planning approvals. We maintain our Buy recommendation with fair value at $4.13, representing a potential upside of 30.7% from its latest closing price. – Phillips Securities Research

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