SGX: S$5.40 SELL (TP: S$3.95) - Nov futures turnover volume plunged

Dec stockmarket turnover value remains soft. Average daily stockmarket turnover value was S$0.96b for the first 11 trading days of Dec 08. Though this is close to Nov 08’s S$1.04b, it represents a sharp 31% decline from Oct 08’s S$1.40b. The average value per share traded has also fallen from Oct 08’s S$1.03 to Dec 08’s S$0.86 – suggesting a shift towards trading of smaller cap stocks. However, we note that Dec is seasonally a month of weaker trading volumes due to the holiday season. Hence, despite the weakness in Dec, we are maintaining our FY09 and FY10 ADT assumptions of S$1.19b and S$1.24b respectively.

Futures turnover strength has abated. After recording very strong futures trading volume of 6.47m and 6.84m in Sep and Oct 08 respectively, futures turnover fell to 4.44m in Nov 08, with a 1.69m MoM decline in Nikkei futures trading volume. We do not read this positively as derivatives clearing fees account for 29% of 1QFY09 overall revenue. As the weakness only occurred for one month, we maintain our FY09 and FY10 futures turnover volume of 72m and 75m respectively, and will review the numbers, if necessary, at a later date.

Is an assumption of FY10 ADT of S$2.1b reasonable? We do not think so, given that Dec 08’s was S$0.96b. SGX traded at mid-teens P/E in 2005, when FY05 ADT fell 14.5% YoY. We believe a fair P/E rating is 13x, factoring in the more severe decline this time round – we are assuming FY09 ADT to fall 47%. Our target price of S$3.95 is pegged to this 13x P/E rating. Based on the current price of S$5.40 (and applying a 13x P/E rating), the market is assuming a FY10 ADT of S$2.1b, which we feel is unachievable. Maintain SELL on SGX.

source: DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Pan Hong Property Group: S$0.20 NEUTRAL (TP: S$0.25) - A Modest But Reasonable Take-Up in Huzhou

A Modest But Reasonable Take-Up In Huzhou

Pan Hong attained a modest take-up rate of 41% for Huzhou Liyang Jingyuan (HLJ) Phase 2, a 150-unit residential project which it launched two weeks ago. A total of 61 units (~7,000 sm in GFA) were transacted at an average selling price of RMB4,950 psm, slightly under our estimates of RMB5,000 psm. Assuming a breakeven price of RMB3,000 psm, they would contribute 0.41¢ / share to NAV when completed and handed over in 2Q09. Despite the weakening sentiments surrounding China’s real estate sector and deteriorating operating environment for property developers, Pan Hong was able to sell close to half of the project within a short period of time from the launch date. We view this positively, and attribute it to a confluence of factors, including Pan Hong’s proven track record in Huzhou (having completed 7 projects here), the buyers’ genuine owner-occupier profile, as well as the project’s quality and good location. Of late, there has been a slew of government policies aimed at bolstering the role of the financial sector in supporting economic growth. At the same time, the Chinese government could be implementing more sector-specific policies in the near term. While the government’s increasing ardor in its introduction of expansionary policies are positive, we would like to stress that implementation is the key here. Judging from the size of the country and historical lead time of policies meted out, it could take a longer than expected time for the intended impact of the policies to filter down to each of the different provinces and cities. Since our initiation report, Pan Hong’s share price has remained flat. Given its residential-centric business model, Pan Hong is not spared from the current weakening sentiments, sales volumes and take-up rates that are plaguing the property sector across China, including the lower-tier cities which Pan Hong is exposed to. Any available catalyst would have to rely on the rate at which the government’s various policies hit the ground running, coupled with a global recovery in real estate sentiments. On the bright side, Pan Hong does have a relatively strong balance sheet - current net gearing ratio of 0.33x and cash position of RMB111.9m. In light of the above, we maintain our NEUTRAL call for the stock with a target price of S$0.25.

source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Parkway Holdings: S$1.20 BUY-Initial (TP: S$1.45) - Strong branding will help it ride out challenging times

Strong branding will help it ride out challenging times

Thanks to a strong brand name, Parkway has been able to execute its strategies in growing revenue intensity. In 9M08, it recorded a 5.9% YoY increase in net revenue per adjusted patient day to S$1,850. Going forward, Parkway plans to focus more on complex cases that would generate more revenue. This would help to offset the expected lower hospital admissions due to the economic downturn. Its achievements in the medical field have given Parkway the edge over peers, to draw patients to its medical facilities.

New 350-bed Novena hospital. Parkway secured the 1.7ha Novena Terrace / Irrawaddy Road hospital site, with a bid of S$1.284b. The land parcel has been fully paid on 20 May 2008. This site can be developed into a 500-bed private hospital with a maximum GFA of 778,500 sf. Parkway intends to put in 350 beds in this new Novena hospital. The hospital is expected to be operationally ready in 2011 and Parkway would be in a good position to capture the influx of medical tourists.

Regional footprint contributes to earnings. Parkway operates hospitals and medical centres across the region, allowing it to draw foreign patients to its Singapore operations, and also contribute to earnings. Having a regional exposure also helps to boost Parkway’s brand name. On top of that, with hospitals in the region, Parkway is also in a position to capture the portion of medical tourists who opt for treatments in the neighbouring countries where Parkway has a presence, given the current economic climate. In that sense, Parkway may not lose out that much, from the potential dip in foreign patients.

Initiate coverage with BUY recommendation. With a strong brand name and regional footprint, Parkway is positioned to draw patients to its medical facilities, even in the economic downturn. Parkway is a larger healthcare provider, compared with its peers, in terms of market capitalization and operations. Hence, we ascribe a PE of 13x for its healthcare services and hospital business. Based on our SOTP valuation, we arrive at a 12-month target price of S$1.45 for Parkway.

Source:DMG

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

Low Keng Huat Q3 profit trebles

Property and hospitality group Low Keng Huat (Singapore) yesterday reported a net profit of
$12.95 million for the third quarter ended Oct 31, 2008 - more than treble the $3.75 million for
the previous corresponding quarter. This drove earnings per share for the quarter to 1.75
cents, up from 0.51 cents in the year-ago period. Higher earnings came on the back of a near
doubling in revenue to $52.26 million from $26.45 million. For the nine months ended Oct 31,
Low Keng Huat's net profit surged 105 per cent from a year ago to $23.36 million. The higher
earnings were mainly due to higher development profit from associated companies.
Contributions from projects such as the one-north Residences, Duchess Residences and
Regency Suites had increased, while those from Domain 21 had dropped.
Low Keng Huat also benefited from lower construction losses, partly because it managed to
recover some cost increases. Net earnings in the nine months would have been higher if not
for lower profits from the hotel and investment segments. Net profit before tax and minority
interests for the hotel business dropped as concessionary income from gaming centre
operations fell. Overall hotel revenues were also lower as the weaker Australian dollar shaved
revenues from Duxton Hotel Perth. Investments also booked a lower net profit before tax and
minority interest. This was due to the sale of some quoted equities which had to be marked to
market. Group revenue in the nine months soared 66 per cent from a year ago to $148.09
million, driven largely by an increase in construction revenue.
There was a higher percentage of completion for ongoing projects and new projects - the
Hardrock Hotel at Sentosa and Meritus Mandarin Hotel - had also started. Low Keng Huat said
that it is 'in a strong financial position'. Its net gearing as at Oct 31 was 15.4 per cent, lower
than the 24.2 per cent at end-January. The group also expects its two hotels in Perth and Ho
Chi Minh City to perform well despite more challenging economic conditions in Western
Australia and Vietnam. Low Keng Huat won a $295 million project last month to construct a
shopping mall cum bus interchange complex at Serangoon Central. Its order book as at
November was $900 million.
Source: Business Times and Bloomberg

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned

SIA Nov traffic slump biggest in 5 years

(Singapore) Singapore Airlines, the world's largest carrier by market value, reported its biggest
slump in traffic in more than five years as a global recession cuts travel demand. Passenger
numbers slid 6.1 per cent last month to 1.54 million, the airline said in a Singapore stock
exchange statement yesterday. That's the biggest drop since a 7.6 per cent decline in August
2003, according to data compiled by Bloomberg.
SIA's traffic has declined in two of the past three months as financial firms cut business travel
and people cancel leisure trips. Global air traffic will decline 3 per cent next year, the first drop
since 2001, the International Air Transport Association has said. The airline gained 0.2 per cent
to $11.06 in trading yesterday. The shares have declined 36 per cent this year.

The Material provided above is for information only and does not constitute an offer or solicitation to purchase or sell the shares mentioned