Singapore Primer 2012 Nomura 11.21.11

ANCHOR REPORT
Singapore outlook 2012

EQUITY RESEARCH
Staying defensive
November 21, 2011 Research analysts
As growth slows, we like yield plays but property pullback is a risk

Singapores GDP growth faces downside risks due to weaker external demand as well as supply bottlenecks. We think 2012 EPS growth could miss the consensus expectation of 9%. A pullback in residential property prices could further hit the city states economy. We like classic defensives and company-specific catalysts: high yielders with strong franchises and balance sheets like Keppel Corp, F&N, OCBC, SingTel and Comfort DelGro.
Singapore Strategy Jit Soon Lim, CFA - NSL jitsoon.lim@nomura.com +65 6433 6969 And the Singapore Research Team
Key analysis in this anchor report includes:
Fresh updates on the ten stocks we like most. Some have the potential
to use macro weakness to increase their competitiveness.
M&A diary whos got the ability and possible intent? Following on from our economics teams recent warning of a possible
hard landing in China, we identify DBS, Wilmar, Capitaland and Keppel Land as vulnerable.
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Singapore outlook 2012

EQUITY STRATEGY
EQUITY RESEARCH
ANCHOR REPORT: Staying defensive
November 21, 2011
As growth slows, we like yield plays but property pullback is a risk

2012 outlook: Be selective and defensive We expect consolidation to continue in 2012 with the STI likely to be trading between 2,600 and 2,900 as macro concerns, slower GDP growth and a possible property-market correction constrain returns. We advise positioning in sectors and stocks that provide sustainable dividend yields and which can rerate on their own fundamentals. Economy growing below potential; pullback in property market We see downside risks to GDP growth as Singapore copes with weaker external demand and supply-side bottlenecks. A pullback in residential property prices could further dampen the economy. Market EPS growth of 9% could disappoint in 2012 The 2012 consensus market EPS growth forecast for Singapore of 9% may slide further on margin pressures and weaker demand. Although valuations look attractive at 1.3x price to book, there are few catalysts to help rerate. Bullish on telcos and conglos; bearish on gaming We remain defensive in 2012 and are bullish on Telcos, REITs and conglomerates for their yields. We are bearish on developers given our cautious view on residential property and we remain bearish on gaming given downside earnings risks. Stock picks We select stocks with strong franchises and balance sheets that can sustain attractive dividends and have their own drivers. These include Keppel, F&N, OCBC, SingTel, SATS and Comfort Delgro. Within REITs we like CCT given its attractive yield (6.5%) and valuation. We believe CMA should rerate once its malls in China start to contribute in 2012. Themes: Buying promising companies with undervalued optionality We highlight Biosensors, Comfort Delgro, Mobile One and Olam as stocks with core franchises that are attractive and with optionality on future growth prospects. Themes: M&A companies that can look to expand We highlight Keppel, SATS and F&N as companies that have the ability to make acquisitions amidst this economic uncertainty. Anchor themes Slower GDP growth and a potential correction in the property market will likely constrain the market in 2012. However, the government has sufficient policy tools to cushion the economy should there be a major external shock.
Research analysts Singapore Strategy Jit Soon Lim, CFA - NSL jitsoon.lim@nomura.com +65 6433 6969 And the Singapore Research Team
Given Singapores trade with China, a hard landing there would

negatively impact Singapores economy. Companies with direct exposure in China like DBS, Wilmar, Capitaland and Keppel Land could be adversely affected.
Themes: China hard-landing scenario
Nomura | Singapore outlook 2012
November 21, 2011
Contents
4
Another year of consolidation Sector strategy

10
Our stock picks for 2012
11
Valuation and earnings

11
Earnings
12
Valuation
14
Themes
14
2012 year of reckoning for residential property market
15
M&A / restructuring
16
Promising companies with undervalued optionality
16
China hard landing and implications for Singapore
18
Risk factors
19
Economics Banks Conglomerates/Industrials Plantations/Commodities Gaming Property Telecom Transport

55
21
26
30
38
43
50
55
Airlines
59
Land
62
Shipping
November 21, 2011
66
Biosensors International CapitaCommercial Trust ComfortDelGro Corp CapitaMalls Asia Fraser and Neave Keppel Corp OCBC Olam International SATS
69
75
78
84
88
92
96
99
102 Singapore Telecom
109 Appendix A-1
November 21, 2011
Another year of consolidation

We see another year of consolidation for the Singapore market in 2012. Against the backdrop of a weak global economic outlook and continued pressure on earnings, we see the market consolidating within the 2,600 to 2,900 range on the ST Index. Indeed, if we compare the current market pullback (since the peak in November 2010) with historical episodes, we believe that the consolidation has yet to run its course. Historically, the average consolidation period from peak to trough has averaged 400 trading days and the extent of the pullback has averaged 45%. We have pulled back only 16% from the peak and the period of consolidation has lasted only 257 days.
Fig. 1: Historical trading patterns in a downturn
(%) 0 -10 -20 -30 -40 -50 -60 -70 0 50 100 150 200 250 (Trading days) 300 350 400 17 Feb 97 to 4 Sep 98 3 Jan 00 to 21 Sep 01 19 Mar 02 to 10 Mar 03 11 Oct 07 to 9 Mar 09 9 Nov 10 to Current
Source: Bloomberg, Nomura research
From a valuation perspective, the Singapore market is not expensive. It is trading at 1.3x price to book, or at one standard deviation below the long-term mean of 1.7x. This therefore begs the question: Has the market already priced in the macro concerns?
Fig. 2: Singapore market trailing price to book
(x) 3.0 2.5 2.1x 2.0 1.5 1.0 0.5 ROE (RHS) 1.7 x 1.3x P/B (LHS) (%) 20 18 16 14 12 10 8 6 4 2 0
Nov-02
May-98
May-07
Source: Nomura estimates
Unfortunately, the lagged effects of the global slowdown, continued macro uncertainties and pressure on earnings hinder us from taking a more constructive view. The 2012 consensus earnings growth forecast of 9% for Singapore looks optimistic, in our view, against the backdrop of a slower macro outlook. Indeed a negative earnings growth scenario is plausible should there be a sharp pullback in the economy. Our economist, Euben Paraceulles, highlights the downside risks to the economy for 2012, citing the impact from a slowdown in Europe (see discussion on economics later in this report). Indeed the Singapore government has indicated that Singapores GDP growth could fall below its potential growth rate of 3-5% in 2012.
Nov-11
Jan-97
Jan-99
Mar-02
Jun-05
Jan-08
Jul-03
Feb-04
Feb-06
Dec-00
Dec-09
Sep-97
Aug-99
Aug-01
Sep-06
Aug-08
Aug-10
Mar-11
Apr-00
Oct-04
Apr-09
0.0
November 21, 2011
Fig. 3: NODX vs PMI

y-y chg (%) 50 40 30 20 10 0 -10 -20 -30 -40 NODX - SA PMI Index
Fig. 4: FSSTI vs Industrial Production Index

y-y chg (%) 80 60 40 20 0 -20 -40 Industrial Production Index FSSTI Index
Source: CEIC, Nomura research
Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11
We also highlight that productivity growth has lagged behind wage growth, and a sharp pullback in the economy is likely to put pressure on operating costs leading to potential job cuts. Meanwhile, a lack of visibility in the technology sector would also likely constrain any near-term recovery in exports, which is a leading indicator of a bottomingout of any economic slowdown.
Fig. 5: Singapore tech exports vs Global Semicon inventory
y-y chg (%) 100 80 60 40 20 0 -20 -40 -60 -80 Singapore Tech Export Global Semicon Inventory
Fig. 6: Wage growth vs productivity growth

y-y chg (%) 20 15 10 5 0 -5 -10 -15 -20 Wage growth Productivity growth
1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
Another potential negative factor weighing on the Singapore stock market in 2012 is a sharp pullback in residential property prices. With oversupply emerging from 2012, our property analyst, Sai Min Chow, expects residential property prices to pull back by 610% in 2012 extending to a further 5% weakness in 2013. The STI Index has a good correlation with the URA residential property price index with a two-quarter lag. The correction in the ST Index in 2011 seems to suggest that the residential property market could see a pullback in 2012.
1Q97 4Q97 3Q98 2Q99 1Q00 4Q00 3Q01 2Q02 1Q03 4Q03 3Q04 2Q05 1Q06 4Q06 3Q07 2Q08 1Q09 4Q09 3Q10 2Q11
5
Jan-04 Jun-04 Oct-04 Feb-05 Jun-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 May-09 Sep-09 Jan-10 May-10 Sep-10 Feb-11 Jun-11 Oct-11
-60
November 21, 2011
Fig. 7: Correlation of PPI with FSSTI

(Index) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 100 50 0 200 150 FSSTI (LHS) PPI (lag 2 qtrs) (RHS) (Index) 250
From a regional perspective, the FTSE ASEAN 40 Index has outperformed the MSCI Asia Ex Japan Index in 2011. Within the context of ASEAN, Singapore has underperformed as investors sought the stronger growth markets within ASEAN, such as Indonesia. Even as investors look towards the North Asian markets in 2012 and the faster growth economies in ASEAN, we believe that the Singapore market is likely to lag its ASEAN counterparts again in 2012.
Fig. 8: STI vs FTSE Asean and MSCI ex Japan since Jan 11
120 115 110 105 100 95 90 85 80 75 70 FTSE Asean 40 FSSTI MSCI ex Japan
3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
18-May-11
Add dividends to bolster market returns During periods of prolonged consolidation, dividends are an important source of returns in complementing portfolio returns. During the 2000-2002 period, when the Singapore market was consolidating and produced negative returns, dividends helped to provide some cushion to total returns (see chart below).
14-Nov-11
16-Aug-11
31-Aug-11
15-Sep-11
30-Sep-11
2-Jun-11
18-Jan-11
17-Jun-11
3-Jan-11
2-Jul-11
17-Feb-11
19-Mar-11
3-May-11
17-Jul-11
4-Mar-11
2-Feb-11
15-Oct-11
18-Apr-11
30-Oct-11
3-Apr-11
1-Aug-11
November 21, 2011
Fig. 9: Total returns for Singapore market 2000 to YTD

(%) 80 60 40 20 0 -20 -40 -60 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
STI
USDSGD
Div Yield
November 21, 2011
Sector strategy
With the market volatility and uncertainties, investors have sought out defensive sectors such as telcos and media, and these sectors have outperformed since the middle of 2011. Capital goods, gaming and property have underperformed in the second half of 2011 while banks have broadly tracked the index.
Fig. 10: Outperformers in 2H2011
(%) 10 5 0 -5 -10 -15 -20 STI Media Telco Commodities
Fig. 11: Underperformers in 2H2011

(%) 10 5 0 -5 -10 -15 -20 -25 -30 -35 -40 Cap goods Transport REITs Gaming Tech STI Banks
1-Jul-11 6-Jul-11 11-Jul-11 16-Jul-11 21-Jul-11 26-Jul-11 31-Jul-11 5-Aug-11 10-Aug-11 15-Aug-11 20-Aug-11 25-Aug-11 30-Aug-11 4-Sep-11 9-Sep-11 14-Sep-11 19-Sep-11 24-Sep-11 29-Sep-11 4-Oct-11 9-Oct-11 14-Oct-11 19-Oct-11 24-Oct-11 29-Oct-11 3-Nov-11
Given the earnings and macro headwinds going into 2012, we believe investors should continue to position in stocks and sectors that are resilient and have high dividend yields. In addition, we also select stocks which are less dependent on the economic cycle but are driven by their own stock-specific drivers. We are therefore positive on the telcos, conglomerates and healthcare sectors. We are bearish on gaming and commodities. We are Neutral on transport, within which we are positive on land transport, negative on shipping and neutral on airlines. We are neutral on Banks and Property. Within property we are bearish on developers and bullish on REITs. Our sector views are discussed in detail later in this report, and are summarized below:
1-Jul-11 6-Jul-11 11-Jul-11 16-Jul-11 21-Jul-11 26-Jul-11 31-Jul-11 5-Aug-11 10-Aug-11 15-Aug-11 20-Aug-11 25-Aug-11 30-Aug-11 4-Sep-11 9-Sep-11 14-Sep-11 19-Sep-11 24-Sep-11 29-Sep-11 4-Oct-11 9-Oct-11 14-Oct-11 19-Oct-11 24-Oct-11 29-Oct-11 3-Nov-11
8
-25
November 21, 2011
Fig. 12: Summary of sector view

Sector Bullish Conglomerates Nomura sector view We prefer conglomerates that have strong balance sheets and pay high dividends to bolster returns. Fraser and Neave, Keppel and SCI have strong franchises and balance sheets that can sustain dividends. Lisa Lee is still positive about the Offshore & Marine sector with the rig order cycle supported by improving demand for premium jack up rigs. The next driver for new orders will be demand for semi-subs and contract awards by Petrobras. Sachin Gupta believes that the telco sector offers stability of cashflow, strong balance sheets, and potential for capital management. He opines that NBN take up rates should pick up in 2012 and sees M1 as a beneficiary with a 6-8% revenue contribution by 2012. He is therefore bullish on M1. He is Neutral on Singtel but recognises that it is a large liquid stock for investors to cushion from market volatility. He is Neutral on Starhub. The healthcare sector has been resilient with Biosensors and Raffles Medical seeing good earnings growth, the former due to strong orders for its DES products and the latter with good demand from local and foreign patients. We like Biosensors for its strong earnings growth profile in the next couple of years. Stock picks SCI, F&N, Keppel
Telco
Sing Tel, M1
Healthcare
Biosensors
Neutral Banks/Financials Valuations for the Singapore banks are attractive, with P/Bs of 1.0-1.2x FY12F on ROEs of 11-13% and attractive dividend yields of 4-5%. Margins should stabilise in 2012 but loan demand will likely slow to low teens. We forecast sector EPS growth in the 3-7% range for FY12. OCBC is preferred given its regional footprint and wealth management/insurance franchise. Singapore banks have strong balance sheets to benefit from possible withdrawal from EU competitors. SPH has held up well as ad spend has remained resilient, supporting earnings and dividends. While earnings will start to reflect any economic slowdown, its new investments in property could provide some cushion. Dividends are attractive and balance sheet remains solid. Min Chow points to the oversupply of properties available for sale and rent in 2012. He forecasts a decline of 10% in prices of mass private residential and 6% fall for luxury properties in 2012. He likes UOL for its defensiveness as it has sold much of its inventory. He prefers the resilient yields within the REIT space and likes CCT as its implied EV is just S$1451psf. He also likes CMA as it looks under valued and should rerate once its new malls in China start to contribute positively in 2H2012. Shipping: Andrew Lee remains bearish on container and dry bulk shipping given continued pressure on freight rates amidst rising supply. With widening losses at NOL, he would avoid the stock. Land Transport: Increased pressure to raise service levels will likely add more costs for SMRT and ComfortDelgro. Comfort however has the benefit of a diversified business which has helped improve earnings. We prefer Comfort for this reason and its dividend yield. Airlines: SIA may see pressure on yields as the global economy slows but the share price has pulled back to more attractive valuation of 0.9x price book. OCBC
Media
SPH
Property
UOL, CMA, CCT
Transport
Comfort Delgro
Bearish Gaming Wai Kee believes analysts have generally overestimated the potential of the gaming market in Singapore, as borne out by Genting Singapores results. Also the sector may be more sensitive to an economic slowdown as the VIP segment may moderate under that scenario. In addition there could be policy risks as well as the government tightens regulation over the casinos. He believes GENS is overvalued and maintains a REDUCE. Min Chow Sai is Neutral on CDL H-REIT on valuation grounds, as the shares have priced in optimistic scenarios for occupancies and room rates. Muzafar, our ASEAN plantations analyst, is cautious on the upstream plays as the average CPO price for 2012 is expected to be slightly lower than in 2011. In addition tree stress and La Nina could also reduce production in 2012. Tanuj Shori likes Olam as he is positive on the groups long-term prospects with optionality on its fertiliser investment in Gabon. He remains cautious on Wilmar. Olam
Commodities
Source: Nomura research
While we focus on stocks which strong balance sheets and cashflows to sustain high dividends, we also pick stocks that have strong franchises and potential rerating factors that can help drive outperformance. We have dropped Golden Agri and ST Engineering from our top stocks and have added Comfort Delgro and CMA. We added Comfort for its defensive characteristics and dividend yield. We like CMA as we believe it is underappreciated and has the potential to rerate once its China properties come on stream in 2H2012.
November 21, 2011
Our stock picks for 2012

Fig. 13: Summary of stock picks
Price (SGD) Defensive earnings with yield SATS 2.37 Rating BUY Price target (SGD) 3.16 P/E (x) FY12F 11.8 PBV (x) FY12F 1.6 Yield (%) FY12F Nomura comment 5.1 Dominant position in ground handling in Changi and increasing contribution from overseas associates underpin steady earnings and dividends. Sale of Daniels could also facilitate more M&A to enhance its global footprint 5.6 Diversified and steady cashflows and a strong balance sheet will help sustain its high dividend yield. Strong free cashflows should enable SingTel to support more aggressive capital management. 3.1 Growing F&B business with strong core franchises should help cushion any weakness in the property activities. Strong balance sheet and cashflows suggest group may look to M&A to expand further. 4.5 Diversified rail, bus and taxi businesses across many regions help sustain steady earnings. Valuations are reasonable while dividend yield of 4% is attractive. 6.5 Undervalued commercial office assets with EV psf of S$1,500. Yield of 6.5% is also attractive.
Singapore Telecom
3.21 NEUTRAL
3.40
13.5
2.0
Fraser & Neave
6.26
BUY
7.29
11.9
1.0
Comfort Delgro
1.42
BUY
1.72
11.7
1.4
CapitaCommercial Trust
1.14
BUY
1.47
15.4
1.5
Reasonably priced, with optionality CapitaMall Asia 1.36
BUY
1.66
23
0.9
2.2 Transaction benchmarks continue to suggest 0.9x book value is conservative and therefore share price undervalued. Turnaround in 2012F appears on track with increased stakes in Minhang and Hongkou malls in Shanghai. 2.2 Managed volatility in commodity markets well with a diversified portfolio. Target price supported by value of Gabon fertilizer project which will be accretive in our view. 3.8 ASEAN and diversified product base (insurance and wealth management) to cushion downside risks in Singapore. 4.5 Order book of S$9b to sustain profits while property earnings to cushion in 2012. Optionality on oil price trending higher. - Earnings growth underpinned by market share gains in Japan and EU. This should mitigate concerns about ASP pressure in China. New product pipeline in place to sustain future growth
Olam International
2.44
BUY
3.50
13.2
1.7
OCBC Keppel Corp Biosensors
8.36 9.30 1.39
BUY BUY BUY
10.70 11.10 1.70
11.8 11.0 12.7
1.2 1.7 1.4
10
November 21, 2011
Valuation and earnings

Earnings
Price to earnings are less relevant in an environment of continued earnings downgrades. Indeed, with the conclusion of the September quarter results season, we found that 54% of companies we tracked reported earnings that were below our expectations, while 21% met expectations and 25% beat our expectations. Some notable disappointments were UOB due to higher provisioning for its EU exposure and Genting Singapore following unexpected provisions for its bad debts.
Fig. 14: Scorecard of Singapore companies September quarter results
In line 21%
Above 25%
Below 54%
With the earnings underperformance and increased caution among investors, the 2011 consensus market EPS growth forecast for Singapore was revised to just 4% compared to growth of 10% at the start of the reporting season. Meanwhile, we think the consensus market EPS growth estimate of 9% for 2012 remains optimistic against the backdrop of an even slower economic outlook. Indeed, in past episodes where the economy was slowing, earnings growth has slowed to single digit percentage or even contracted. Back in 2008, market EPS growth declined by 18% due to provisions by banks and property companies. While we do not expect the extent of the decline to be the same this time around, it is conceivable that market EPS growth for FY2012 could be negative, and this may not have been priced in.
Fig. 15: Singapore market earnings growth trend
Growth (%) 14 13 12 11 10 9 8 7 6 5 4 2011F Earnings growth (LHS) 2012F Earnings growth (RHS)
Fig. 16: Earnings momentum index

(STI Index)
20 18 16 14 12 10 8 6 4
4,000 3,500 3,000 2,500 2,000 1,500
FSSTI Index (LHS) Earnings Momentum Index (RHS)
(Index) 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1.5 0.5 -0.5
Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11
Jan-03 Jul-03 Dec-03 Jun-04 Nov-04 May-05 Oct-05 Apr-06 Sep-06 Mar-07 Aug-07 Feb-08 Jul-08 Jan-09 Jun-09 Dec-09 May-10 Nov-10 Apr-11 Oct-11
1,000
11
November 21, 2011
Nomuras own estimates for FY2011 and FY2012 earnings, from a bottom-up perspective, are 6% and 5.7% respectively. For FY2012, we have pencilled in growth of 10% for the banks, 18% for commodities and -14% for residential property. These sectors could see potential downside risks if the global economy deteriorates significantly.
Fig. 17: Nomura earnings estimates
P/E Banks Capital Goods/Conglomerates Commodities Media Gaming Property - developers Property - REITs Technology Telecom Transport - air Transport - land Total Market
Note: Priced as at 15 Nov 11 Source: Nomura estimates
EPS Growth FY12F 9.7 13.5 11.1 16.1 20.7 19.9 14.9 12.7 13.1 7.1 13.0 11.1 FY11F 3.9 (5.1) 35.9 (15.7) 51.0 15.2 3.7 (22.7) 0.6 29.8 3.4 6.0 FY12F 10.5 (10.9) 17.8 3.7 (5.8) (13.5) (0.9) (2.7) 4.0 11.3 11.5 5.7
P/B FY11F 1.2 2.0 1.9 3.0 3.2 0.9 1.0 1.0 2.4 0.9 2.1 1.4 FY12F 1.1 1.8 1.7 3.0 2.8 0.9 0.9 1.0 2.4 0.8 2.0 1.3
ROE FY11F 11.3 16.5 15.2 18.0 16.8 6.4 6.4 8.0 17.5 10.0 14.6 11.8 FY12F 11.8 13.6 15.7 18.6 13.5 6.4 6.3 7.7 18.5 12.0 15.3 11.6
Div Yield (%) FY11F 4.3 4.1 1.8 5.4 0.0 1.6 6.1 8.2 7.9 5.0 4.2 4.3 FY12F 4.7 4.1 2.2 5.4 0.0 1.8 6.2 8.2 5.5 6.3 4.4 4.1
FY11F 10.8 12.0 13.1 16.8 19.5 17.2 13.9 12.4 13.6 9.2 14.5 11.7
Valuation
Fig. 18: Singapore 12-months forward PE band
(x) 30 25 20 15 10 5 15.0x 12.0x 18.0x 12mth fwd P/E Mean +1 stdev -1 stdev
Fig. 19: Singapore market trailing P/B vs ROE

(x) 3.0 2.5 2.0 1.5 1.0 0.5 0.0 ROE (RHS) 1.3x (%) 20 18 16 14 12 10 8 6 4 2 0
P/B (LHS) 2.1x 1.7x
Jan-97 Sep-97 May-98 Jan-99 Aug-99 Apr-00 Dec-00 Aug-01 Mar-02 Nov-02 Jul-03 Feb-04 Oct-04 Jun-05 Feb-06 Sep-06 May-07 Jan-08 Aug-08 Apr-09 Dec-09 Aug-10 Mar-11 Nov-11
At 1.3x price to book, the valuation of the Singapore market looks undemanding. Relative to its history, it is at one standard deviation below the long-term mean of 1.7x. However, in the absence of rerating drivers, the market may not revert to the mean and continue to consolidate at current levels. This is plausible as the low price to book valuations accorded to the banks and property sectors (which collectively comprise 45% of the market indexs weighting) may reflect investors concerns about the impact of an economic slowdown or a sharp property market correction on valuations.
Jan-97 Sep-97 May-98 Jan-99 Aug-99 Apr-00 Dec-00 Aug-01 Mar-02 Nov-02 Jul-03 Feb-04 Oct-04 Jun-05 Feb-06 Sep-06 May-07 Jan-08 Aug-08 Apr-09 Dec-09 Aug-10 Mar-11 Nov-11
12
November 21, 2011
Fig. 20: P/BV of banks

(x) 3.0 2.5 2.0 1.5 1.0 0.5 1.7x PBV of market Average PBV of market PBV of Banks
Fig. 21: P/BV of property stocks

(x) 3.0 2.5 2.0 1.5 1.0 0.5 1.7x PBV of market Average PBV of market PBV of Property
Oct-02
Apr-06
Oct-09
Nov-04
May-08
Nov-11
Sep-07
Dec-06
Jan-09
Jan-02
Jun-03
Mar-04
Jun-10
Jul-05
Feb-11
Nov-07
May-04
May-08
We also note that since the market bottomed in May 2008, the price-to-book valuation of Singapore has not rerated past the long term mean of 1.7x. With a lackluster global outlook, perhaps the new trading range for the Singapore market will be narrower at between 1.3x and 1.7x suggesting 1.5x as the new mean for the market. Regional valuation comparison Compared against the other Asian markets, Singapores earnings and valuation profile implies that it is not cheap but that neither is it expensive. On a price-to-book basis it is one of the cheaper markets but with lower ROE as well. On an EPS growth basis, it is one of the lower EPS growth countries but this suggests that earnings risk for other countries may be higher.
Fig. 22: Regional valuation table
Index Country Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand China China China Hong Kong universe* AOI CSI 300 HSI SENSEX JCI KOSPI KLCI PASHR FSTAS TWSE SET SHBSHR SZBSHR MSEUSCF MSDUHK PER (x) 2011F 12.3 10.9 9.4 14.3 14.9 9.7 15.5 13.7 12.9 14.5 11.2 12.7 13.4 9.6 13.1 2012F 10.9 9.1 9.1 12.5 12.5 8.5 13.8 12.1 11.8 12.2 9.8 10.3 10.7 8.6 13.0 PBV (x) 2011F 1.6 1.7 1.3 2.7 2.9 1.2 2.0 2.0 1.3 1.7 1.8 1.7 2.7 1.6 1.2 2012F 1.5 1.5 1.2 1.9 2.6 1.1 1.9 1.8 1.2 1.6 1.6 1.6 2.3 1.4 1.1 EPS growth (%) 2011F 16.0 22.2 20.8 10.4 22.4 14.3 5.1 4.5 4.1 (9.4) 10.2 20.5 23.6 17.4 7.8 2012F 11.9 18.9 3.5 14.1 18.2 13.5 12.8 12.8 9.0 18.3 13.1 22.3 24.2 11.5 1.3 Dividend yield (%) 2011F 4.8 2.9 3.9 1.4 2.6 2.3 3.8 2.7 3.5 4.6 4.2 3.0 2.0 3.6 3.0 2012F 5.1 3.3 4.3 1.9 3.1 2.6 4.0 2.8 3.6 4.9 4.6 4.6 2.3 3.9 3.2 ROE (%) 2011F 13.0 17.4 14.8 17.5 21.3 13.2 13.5 15.2 9.5 11.9 16.5 18.9 22.9 18.1 9.7 2012F 13.8 18.1 14.0 16.2 21.5 14.0 14.5 15.9 9.9 13.4 16.8 12.0 20.9 17.8 8.1
Nov-11
13
Jan-02
Jul-05
Mar-03
Feb-06
Jul-09
Feb-10
Oct-03
Apr-07
Aug-02
Sep-06
Sep-10
Dec-04
Dec-08
Apr-11
November 21, 2011
Themes
2012 year of reckoning for residential property market
The Singapore residential property market has remained resilient in 2011 in spite of the cooling measures introduced by the government since September 2009. The transaction volumes of new properties have continued to remain steady although the pace of increases in property prices has decelerated.
Fig. 23: Transaction volumes increase in PPI (monthly since 2008)
Primary sales (LHS) Secondary sales (LHS) Pte ppty px index (RHS)
12,000 10,000 8,000 6,000 4,000 2,000 0
250 200 150 100 50 0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
With a rising inventory of unsold properties, rising vacancy rates and an uncertain macro outlook, our property analyst Sai Min Chow expects the residential property prices to pull back by 6% to 10% in 2012 with further 5% weakness expired in 2013. We would add that a sharp pullback in economic activity, coupled with rising unemployment, would put additional pressure on the already over extended residential property market. Indeed, if history is any guide, the stock market has been a good leading indicator of property prices, albeit with a two quarter lag. While residential property stocks may look attractive, pressure on the physical property market will continue to undermine the share price performance of the developers. This scenario could also lead to further downside risks to earnings, especially for developers and banks, in our view.
Fig. 24: Correlation of RPI with FSSTI
(Index) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 0 100 50 200 150 FSSTI - LHS PPI (lag 2 qtrs) - RHS (Index) 250
Source: Boomberg, Nomura research
3Q11
14
November 21, 2011
M&A / restructuring
2011 saw the continuation of regional M&A, with the takeovers of Kim Eng Securities by Maybank and C&O Pharmaceuticals by Shionogi & Co as notable examples. The undervaluation of property companies in Singapore also prompted the Kuok Group to privatize Allgreen Properties.
Fig. 25: Notable M&A activity in Singapore in 2011
Company Allgreen Maybank Shionogi & Co Shangdong Weigao Nestle CDH China Mgt Target Privatisation by Kuok Group Kim Eng Securities takeover C&O Pharmaceutical takeover 16.2% stake in Biosensors 60% interest in Hsu Fu Chi Sinomem takeover Description Done at 1.0x price to book value Takeover valued at SGD1.9bn. Raised stake to 64% for SGD132mn Looking to increase stake to 21.6% Nestle paid SGD2.1bn for the Chinese confectionary company Valuing Sinomem at SGD351mn
Source: Company data, Nomura research
Fig. 26: Notable M&A by Singapore companies in 2011

Company Cerebos SATS Mapletree Investments (part of consortium) Action Acquisition of Comvita in New Zealand Acquisition of 51% of TFK, Japan Festival Walk Mall, Hong Kong Description Honey based natural products company. Valued at NA$71.6mn Acquired stake in leading food caterer in Narita and Haneda airports for SGD122mn Valued at USD2.4bn
Even as companies have turned cautious going into 2012, we believe the economic slowdown may create opportunities for M&A. Recall that many financially stronger companies failed to capitalise on M&A opportunities in the last financial crisis. The opportunity may present itself again in 2012. Meanwhile, valuations will likely become more reasonable, we think, enabling transactions to proceed. Also, in an environment of reduced liquidity, in our view it will be the larger and better capitalised companies that will have the financial strength to execute M&A. In this regard, we highlight companies that have the financial strength and a stated ambition to embark on M&A and the possible targets they may be interested in.
Fig. 27: Singapore corporate who have the financial strength for potential M&A in 2012
Company Keppel Corp SIA Fraser and Neave SCI SATS SPH Biosensors SGX Balance sheet Gearing of 0.18x Net cash 30% gearing Net Cash Net cash Net cash Net Cash Net Cash Potential targets Looking to acquire capabilities or shipyards overseas Well positioned to acquire airlines in the region Looking to acquire brands in F&B space Looking to buy assets/businesses in water and utilities Looking to acquire ground handling and in-flight catering businesses. Sale of Daniels for SGD321mn will increase war chest Retail property developments, out door media and regional magazine titles Looking to acquire distributors and new med tech products with high margins On lookout for exchanges globally
We also look at companies that have stated publicly that they are looking to restructure to unlock value by divesting their non-core activities, or that we think could themselves become attractive targets. We highlight some potential corporate actions in Singapore below:
15
November 21, 2011
Fig. 28: Potential corporate actions in Singapore

Company Fraser and Neave Fraser and Neave SIA SPH Keppel SCI Singtel
Asset Times Publishing Property and F&B 49% stake in Virgin 13.7% stake in M-1 19.7% stake in M-l 24% stake in Gallant Ventures 50% stake in PT Telkomsel
Comments Divestment could raise SGD300 to 400mn Restructuring into 2 separate listed entities Possible sale of stake carried at estimated book value of SGD93mn Sale could raise SGD310mn at current prices Sale could raise SGD445mn at current prices Sale could raise SGD162mn at current prices Possible restructuring
Promising companies with undervalued optionality

Given the macro uncertainties, we believe investors can easily overlook promising companies who are embarking on new ventures or opportunities that may not be priced in by the markets. We highlight below companies that we believe are reasonably priced and have the added optionality on future ventures that may become value accretive.
Fig. 29: Promising companies with under-appreciated assets
Market Cap (SGDmn) 2,194 P/E (x) FY12F 12.7 PBV (x) FY12F 1.4 Yield (%) FY12F -
Company Biosensors
Rating Buy
Nomura comment Emerging DES company with strong presence in Japan, China and EU. Next generation DES is showing promise and could have become another succesful product. The group has strong franchises in taxis and buses in UK, China, Singapore and Australia while its rail activities in Singapore has become a strong cashflow generator. Its Downtown line franchise will provide room for future growth in rail. M-One is seen as the one that is most likely to benefit from the NBN roll out in Singapore. Olam has a diversified agri business which has enabled it to ride the volatility of the commodity markets. We believe its proposed fertiliser project in Gabon will add significant value to Olam while its move into sugar is expected to be accretive as well.
Comfort Delgro
2,287
Buy
11.7
1.4
4.5
Mobile One Olam
2,236 4,025
Buy Buy
13.2 13.2
6.0 1.7
6.0 2.2
In terms of other mid caps on the radar of some in the market for having solid fundamentals and good prospects, we highlight: 1) Ezra, which has successfully ventured into offshore services with initial contracts of S$1bn. The shares have pulled back by 50% this year due to concerns about its diversification into offshore services and it is now at 1.1x price book (per consensus). 2) Amtek, which is a metal stamping manufacturer providing complete design and build solutions. The share price has pulled back 54% since listing. It is venturing into healthcare and extending into auto parts manufacturing. 3) Goodpack, which has a strong franchise in MBC for transport of natural and synthetic rubber. It is diversifying into the automotive sector. 4) Osim, which has built up a strong brand in consumer products in the region and nurturing new lifestyle brands like GNC and TWG.
China hard landing and implications for Singapore

The economics and strategy team recently issued a report assessing the implications of a hard-landing scenario in China (see China Risks, dated November 2011 by Rob Subbaraman et al). The teams base case is that China's economy will average growth of about 8.5% in 2012-14, but they judge that the risks of a temporary interruption that pushes growth far below potential are rising. They define a so-called economic hard
16
November 21, 2011
landing as an abrupt slowdown in real GDP growth to an average of 5% y-o-y or less over four consecutive quarters. They identify six factors that could lead to a hard-landing scenario: 1) 2) 3) 4) 5) 6) Overinvestment and excessive credit; Rudimentary monetary architecture; The privileged state-owned enterprises (SOEs); Unintended consequences of financial liberalization; The Lewis turning point; and The setting in of growing pains.
A hard-landing scenario in China against the backdrop of a muted macro outlook for the US and EU could push Singapores 2012 GDP growth to minus 5%. China is important for Singapore as 9.5 % of its NODX is to China while 10.6% of tourist arrivals in 1H2011 were from China. Singapores exports to China would likely be negatively affected while the services sector could be impacted if Chinese tourist arrivals slow sharply. With Chinese buyers forming an estimated 5-7% of property purchasers in Singapore over the past three quarters, a pullback in demand could also affect the Singapore property sector. Companies that have direct exposure in China that could be negatively affected include Wilmar, Keppel Land, Capitaland and DBS Bank. In addition to the direct effects, Singapores trade with its regional trading partners could also be dampened if they also suffer from a China slowdown. A contraction in economic growth implied by the confluence of a hard landing in China and muted EU and US growth would have detrimental effects on the domestic economy and implications on bank lending and the property. We highlight below companies that may be impacted directly by a hard-landing scenario in China.
Fig. 30: Showing only those negatively affected
China sales Most affected Capitaland Ticker CAPL SP share 2011 (%) 25.0 EPS 2012 15.35 Base case y-y chg (%) (4.7) Target price 4.05 Extreme case* EPS 2012 13.00 y-y chg (%) (19.3) Target price Comments 3.30 CMA is the biggest component of CAPL's NAV, representing 26.5% of which 32.4% is attributable to CN. The CN residential segment accounts for a further 14.1%. As such, CAPL's performance continues to be driven by China, rather than SG, in our view. 3.21 KPLD has 32.5% of its NAV in CN residential projects. A slowdown in GDP will have direct impact on its projects in CN and spillover effects on projects in SG as well. 4.40 Volumes could decelerate mainly in Palm & laurics, Oilseeds processing and consumer pack segments. Also PE multiples may contract in case of hard landing scenario
Keppel Land
KPLD SP
40.7
24.5
8.2
4.90
19.00
(16.1)
Wilmar
WIL SP
52.0
35.0
12.3
5.90
29.00
3.7
DBS Bank
DBS SP
8.1
130
7.2
16.40
92.00
(24.2)
13.20 6-7% of assets in China and 20-22% assets in HK. Loan growth could delerate to 2% and credit charges rise to 100bps in a -5% GDP scenario. EPS could fall by 25% in 2012.
17
November 21, 2011
Risk factors
Risk factors for the Singapore market include: 1) Hard landing in developed world and China. Our economists have provided a worst case scenario of recession in the EU or US. Under this scenario, Singapore's growth rate could pull back to 2%. If we add on to the double dip scenario a hard landing scenario for China, the Singapore economy could see a serious setback, with the economy contracting by 5% in 2012. Wage pressures. As Singapore looks to wean the economy from over-reliance on foreign workers, we could see wage pressures increase for companies that are more dependent on foreign labour, undermining their profitability. This adjustment process could undermine economic growth. The Singapore property market is at its all time high. A sharp pullback could affect the earnings of banks and developers and create a drag on the stock market. In addition the negative wealth effect from a falling property market may undermine consumption and further depress the economy. Sharply rising interest rates. For the moment we are forecasting interest rates to pick up only from end 2012 in tandem with US rates. However, should rates start to pick up sharply, this could put pressure on borrowers, especially investors who have acquired property in recent months on expectation of continued low interest rates
2)
3)
4)
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November 21, 2011
Economics
Considering the various challenges this year the economy has held up relatively well. But it may be difficult to sustain such resilience in 2012 Activity. We have recently downgraded our 2011 GDP growth forecast to 4.8%, which implies that, after avoiding a technical recession in the third quarter, the economy will experience a sharp slowdown in the fourth quarter. This slowdown is likely going to extend into 2012, where we see rising downside risks to our 5.3% GDP growth forecast and hence have put it under review. The external backdrop is deteriorating further and a recession in Europe (which, as a destination, accounts for 10% of Singapores merchandise exports) will likely push net exports contribution to Singapores headline GDP to turn more negative, although perhaps not as severe as in H1 2009 post the Lehman collapse (see the Figure below). In that scenario, domestic factors could also begin to manifest themselves more significantly, particularly the large negative-wealth effects from volatile financial markets and likely weaker property prices (more than 50% of household assets are in property and stocks and financial securities). Bank deleveraging will also be a key headwind given that European banks have much larger claims in Singapore of more than 80% of GDP versus US banks of around 27% (see Figure below). Investment spending will likely pose a bigger drag than private consumption, like in 2008/09. From the supply side, the electronics downturn is likely to persist, and a further softening in trade-related and financial services seems likely. Against that weak external backdrop, however, there is scope for a sizeable policy response, particularly through fiscal policy (more below). We therefore expect a large fiscal stimulus package that could be unveiled at the next budget speech in February. The size of the stimulus will likely depend on how the external situation unfolds from here but in terms of the growth trajectory, the likely path is such that the first half will be weak before showing some recovery in the second half when we expect the effects of the fiscal response to kick in. Moreover, low interest rates should also persist with USD rates remaining ultra low at least until 2013, so the financial stresses on households that is associated with higher debt servicing costs, along with policy easing (particularly in the property sector which would reverse some of the measures the government implemented to cool property prices), is likely to remain contained. Inflation and FX policy: The announcement by the Monetary Authority of Singapore (MAS) to reduce the slope of the S$NEER band in the October monetary policy announcement was in line with our expectations. But the tone of the policy statement was dovish and may suggest further easing ahead. The MAS highlighted that growth in 2012 could be below its potential rate of 3-5%. Core inflation is also expected to decline to 1.5-2% because of the growth slowdown and subsiding imported inflation. However, we think there will be additional downward pressure from a softening in global commodity prices, which, in the case of 2009, led core inflation to average 0% from 5.7% in 2008. Given that risk, it is noteworthy that the MAS emphasized its focus on core rather than headline inflation.
Fig. 31: Source of Singapore GDP growth
( pp) 30 25 20 15 10 5 0 -5 -10 -15 -20 -25 changes in stocks GFCF PCE Net Exports GCE GDP growth (%y-y)
Euben Paraceulles, Nomura Economics Team
Fig. 32: Claims of foreign banks from Singapore

(USDbn) 200 180 160 140 120 100 80 60 40 20 0
Q1 08 Q2 08 Q3 08 Q4 08 Q1 09
Europe US 185.5
60.6
Q2 09
Q3 09
Q4 09
Q1 10
Q2 10
Q3 10
Q4 10
Q1 11
Q1 06 Q4 06 Q3 07 Q2 08 Q1 09 Q4 09 Q3 10 Q2 11
Source: CEIC, Nomura Global Economics
Source: BIS, Nomura Global Economics
Q2 11
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November 21, 2011
Indeed, our FX strategy team currently believes that the highest probability (around 60%) should now be assigned to a lowering in the slope of S$NEER appreciation to zero in April from our current estimate of a +1% annualized appreciation (see Figure below). We believe this scenario (given the negative macro backdrop) is already priced in and the likelihood of a more aggressive move at this juncture is unlikely. Fiscal policy: In our view, there are three key considerations the government will have in formulating next years budget. First, as mentioned the budget will likely involve some form of counter-cyclical stimulus measures given the external backdrop. Second, post the 2011 elections there will likely be a need for policies that address social issues, such as helping lower-income households and making housing more affordable. Third, the government will likely continue to provide structural support to boost its longer-term objective of raising productivity. Policy measures that will be consistent with all three will be viewed as desirable. For example, the job-credit scheme introduced in 2008/09 could be enhanced with tighter immigration policies that will further reduce reliance on foreign workers and at the same time allow firms to retain Singaporeans in their payroll. In addition, in the MASs October Macroeconomic Review, it highlighted the need for firms to increase capital-to-labour ratios (i.e., capital deepening) to raise productive capacity and buffer against mediumterm tightening of overall labour market conditions. All told, the overall fiscal stance is likely to be highly expansionary next year. Risks: As argued above, we think the high level of uncertainty in the external outlook is the single most important source of downside risks to Singapores growth prospects. A renewed slump in the global economy, driven by the European fiscal crisis, could pose a risk from direct effects and macro-financial linkages that have strong mutually reinforcing effects on growth. However, while Singapore is one of Asias most open economies, it has plenty of scope for fiscal stimulus and the government is capable of quickly introducing emergency measures, including a drawing-down of fiscal reserves. Other policy responses in Asia against external downside risks, particularly in China, will also matter given Singapores increasingly higher sensitivity to the Asian growth performance vis-a-vis the rest of the world (chart below). In this respect, a possible hard landing in China, could prove a bigger headwind.
Fig. 33: SGD NEER
Jan-1999 = 100 Apr-11Recentred midpoint higher but below prevailing S$NEER.
Fig. 34: Singapore electronics IPI correlation

(%) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 with US retail sales of electronics with China imports of consumer electronics
Jan-07
Jan-08
Jan-09
Jan-10
Nov-09
Nov-08
Nov-10
May-09
May-11
May-10
Sep-08
Nov-11
Mar-10
Mar-11
Mar-09
Sep-09
Sep-10
Sep-11
Source: Nomura Global Economics
Source: CEIC, Nomura Global Economics
Jan-11
20
121 119 117 115 113 111 109 107 105 103 101 99 97 95
Jul-08
S$NEERmod S$NEERmid S$NEERup S$NEERlow
Oct-08Zero appreciation bias Apr-08Recentred midpoint of S$NEER
Apr-10 Appreciation bias and recentred S$NEER higher Apr-09Recentred S$NEER lower
Oct-11 Reduced the slope of policy band. Oct-10Increased appreciation slightly and widened policy band slightly.
Jan-10
Jan-09
Jan-11
Jul-09
Jul-10
Jul-11
Banks
BANKS
EQUITY RESEARCH
Singapore banks 2012F outlook
November 21, 2011
Earnings headwinds to mount but strong balance sheets and undemanding valuations buffer
Earnings growth to remain resilient but uninspiring in 2012 Singapore banks 3Q results show that while all banks are seeing a similar top-line dynamic of strong loan growth but weakening margins (NIM), we believe DBS is the only bank set to post FY11F earnings growth (10-12%), still enjoying positive tailwind from normalising provisioning; DBS has also avoided trading and insurance-related drags at peers, with OCBC and UOB on track for flat y-y earnings. We forecast FY12F sector earnings growth in the 3-7% range; loan growth should slow but NIM should be steady, reflecting bottoming interest rates and rising corporate spreads. Credit costs are likely to rise from the current historic lows, though noninterest income stability should, in our view, mitigate this drag. Neutral on banks given challenged earnings growth, lack of catalysts The rising potential for negative news flow on the regional GDP outlook means risks to the already-uninspiring FY12F earnings for the regionally active Singapore banks are on the downside. Lack of catalysts, especially with the interest rate uptrend delayed to at least 2013, underscore a struggle to re-rate despite strong balance sheets and attractive valuation. Long-term investors should accumulate OCBC, which, with the most successful regional and fee-based strategies, has the best structural story, in our view. DBS is an attractively priced play on restructuring delivery (slow), while UOBs defensiveness is overshadowed by OECD exposure. Theme 1: Sustainability of USD lending A key driver of the 3Q YTD average 22% Singapore bank loan growth has been the ability, via SGD-USD swaps, to provide USD trade finance when competitors are either lacking access to USD or reducing exposure to save capital. It will be a challenge to sustain volume in FY12, in our view. Theme 2: The impact of the slowdown in China Notwithstanding Singapore banks modest footprint in China (still mainly servicing network clients), a hard landing for the economy should be a negative overhang. DBS is the most exposed, with HK accounting for 20% of group assets and c.60% of HK lending to the higher-risk SME segment. Theme 3: M&A and opportunistic asset acquisitions Singapore banks are in a strong position to leverage their strong liquidity and capital bases to capture market share, including acquiring regional assets put up for sale by consolidating competitors. We believe a DBSOCBC merger would be highly synergistic and value-generative.
Fig. 35: Singapore Banks: Stocks for Action
C o mp any DBS Group Holdings Overseas Chinese Banking Corp T icker DBS SP OCBC SP N o mur a R at ing Buy Buy M kt cap ( $mn) 23,360 22,200 Pr ice 12.87 8.36 T ar g et Pr ice 16.40 10.70 F Y 12 F PE ( x) 9.9 11.8 F Y 12 F PB ( x) 1.0 1.2 F Y 12 F Y ield ( x) 4.8 3.8
Anchor themes Initiatives to transform Singapore into a global city and diversify the economy, such as developing integrated resorts, broadening of the services and manufacturing sectors, remain well supported and broadly complemented by substantial fiscal and monetary support, which have underpinned employment and domestic demand.
Research analysts Singapore Banks Anand Pathmakanthan, CFA - NSL anand.pathmakanthan@nomura.com +65 6433 6986 Manjith Nair - NSFSPL manjith.nair@nomura.com +91 22 4053 3672
Source: FactSet, Nomura estimates. Pricing as of 15 November 2011
Nomura | Banks
November 21, 2011
Singapore banks: Neutral weight

Singapores bank sector has seen domestic banking unit (DBU) loan growth accelerating uninterrupted since 4Q09, with September 2011 data hitting a new record 31.1% y-y growth (+25.6% YTD). Given DBU data now also increasingly encompasses non-SGD lending, the underlying loan growth in SGD, as indicated by Singapore banks 3Q data, is YTD averaging at 10-12%, with the mortgage segment (Sept: +18.5% y-y) being increasingly overtaken by loans to businesses (Sept: +41.9% y-y). The differential between DBU statistics and Singapore banks SGD lending is coming from regional nonSGD lending, particularly with a significant expansion in USD lending as Singapore banks (DBS and OCBC) find themselves in a strong position to provide USD trade finance out of HK to Chinese corporates. We forecast loan growth for Singapore banks, averaging 3Q YTD 22%, to slow to the low-teens in FY12F, as the overall regional loan demand cools in tandem with slowing GDP growth further, USD trade finance demand is likely to see a drag from reduced trade activity, potentially compounded by reduced Chinese demand due to loosening credit restrictions on the mainland or a less bullish view on RMB appreciation. In terms of USD supply via the SGD-USD swap market in Singapore, Singapore banks are relatively sanguine on a potential squeeze given the depth of the market and the fact that MAS implicitly stands behind its continued functioning.
Fig. 36: Singapore: Sector loan and deposit growth, LDR trend
(%) 35 30 25 20 15 10 5 0
Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
September sector DBU loan growth (which increasingly includes non-SGD lending) at a record 31% y-y underscores strong volume growth at all Singapore banks
USD lending, primarily for trade finance, was the primary driver in FY11F and will continue to play a significant role in FY12F albeit with a reduced momentum, in our view
Loan Growth (LHS) LDR (RHS)
Deposit Growth (LHS)
(%) 90 85 80 75 70 65 60
-5
Source: MAS, Nomura research
Fig. 37: Sing banks: 3Q P&L and balance sheet highlights

Net interest margin (NIM) 3Q 1.73% 1.85% 1.89% 2Q 1.80% 1.87% 1.92% Credit cost (bps, annualised) 3Q 51bps 12bps 29bps 2Q 33bps 19bps 30bps Cost/income ratio 3Q 2Q 43.0% 43.4% 46.6% 43.7% 46.3% 42.6% Gross NPL ratio 3Q 1.3% 0.7% 1.5% 2Q 1.5% 0.8% 1.5% Loan loss cover 3Q 2Q 117% 107% 167% 162% 133% 141% Core Tier 1 ratio 3Q 10.7% 11.2% 12.3% 2Q 11.5% 11.9% 12.6%
3Q loan growth q-q DBS OCBC UOB 10.0% 6.7% 7.0% YTD 22.0% 21.5% 22.0%
LDR (group) 3Q 2Q 87.1% 82.7% 88.0% 89.1% 86.9% 86.6%
The impact of the strong loan growth in FY11F earnings has been diluted by sustained margin (NIM) pressure stemming from a combination of rising funding cost (especially in regional markets where Singapore banks have a mid-tier presence), weakening SGD interest rates and changing asset mix in favour of low-margin USD trade finance (negating the usually NIM-supportive impact of rising LDR). While we expect FY12F NIM to remain sluggish as the positive traction on interest rates remains elusive, another 510bps average decline as seen over FY11F is unlikely the asset mix is set to stabilise as USD lending slows, SGD interest rates have stabilised at a lower level and, most importantly, corporate spreads are expanding again to price in increased liquidity and credit risks.
The FY11F 5-10bps average sector NIM decline is unlikely to repeat in FY12F on stabilising rates and improved pricing
22
Nomura | Banks
November 21, 2011
A similar scenario during the global credit crisis (GCC) allowed Singapore banks net interest income to expand further notwithstanding decelerating loan growth and plunging SIBOR; hence, this underlying NIM support was the key reason for Singapore banks only experiencing a modest 10-15% earnings dip over the GCC period, despite a jump in CDO and loan-related provisioning. On the latter, we anticipate Singapore bank credit costs will rebound in FY12F from the current unsustainably low levels (especially considering bulk of recent provisioning is growth-related general provisioning rather than NPL-related specific provisioning) as slowing economies converge with the maturing of loan book growth nonetheless, with operating income drivers stabilising after a volatile FY11F, and tight cost control, Singapore banks should still be able to deliver 3-7% earnings growth over FY12F.
Fig. 38: Singapore banks: Net interest margin vs. interest rate trend
SGD SIBOR 3 month Q Avg (RHS) OCBC (LHS) DBS (LHS) UOB (LHS)
With NIM stabilising, Singapore banks should still be able to deliver 3-7% earnings growth over FY12F despite an increase in credit costs
NIM (%) 2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 1.8 1.7
Swap-offer rate (SOR) (RHS)
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
Rates (%) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
11/11/2011
Source: Bloomberg, company data, Nomura estimates
Fig. 39: Singapore banks: Loan loss provisioning (as a % of average gross loans)
1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% FY05 FY06 FY07 FY08 FY09 FY10 3Q YTD FY11* FY12F DBS OCBC UOB
Source: Company data, Nomura estimates
The rapid growth in USD lending over FY11F, particularly strong for DBS and OCBC which have seen their USD loan books expand +52% and +77% YTD, respectively, is unlikely to sustain similar momentum over FY12F. First, while the SGD-USD swap market is likely to remain accessible, Singapore banks are responding to market nervousness over their high USD LDRs by moderating USD lending growth to match USD funding growth, the latter including tapping of corporate USD deposits as well as wholesale funding, ie, commercial papers (CPs) and medium-term notes (MTNs). Secondly, underlying demand will slow in tandem with economic activity, though the deceleration will be cushioned by the ability of Singapore banks, stemming from their strong liquidity and capital positioning, to gain market share from consolidating competitors (eg, French banks are reducing commodity trade finance), in our view.
USD lending will slow in FY12F with the anticipated moderation in demand and better matching of loan with deposit growth, in our view
23
Nomura | Banks
November 21, 2011
Fig. 40: Singapore banks: USD loans share and USD LDR
USD loans (as % of total) 35% 30% 25% 20% 15% 10% 5% 0% 3Q10 DBS
Source: Company data, Nomura Research
USD LDR 180% 160% 140% 120% 100% 80% 60% 40% 20% 0%
3Q11
3Q10 OCBC
3Q11
3Q10 UOB
3Q11
Singapore banks are the most exposed among all ASEAN banks to a potential hardlanding scenario for the Chinese economy. Direct assets in China, built up since Singapore banks were locally incorporated in 2007, are relatively modest but nonetheless tangible. There could also be an impact on the domestic Singapore market given the linkages with tourism (>10% of total annual arrivals are Mainland Chinese), property (significant purchasers of high-end property) and wealth management (private banking assets under management). The most exposed franchise, in our view, would be DBS its HK operations are not only sizeable, but the customer base is primarily SMEs (c.60% of book) with China linkages.
Fig. 41: Singapore banks: Greater China and China-specific exposure (1HFY11)
30 25 20 15 10 5 0 DBS OCBC UOB DBS OCBC UOB DBS OCBC UOB DBS OCBC UOB % of group assets in % of group PBT from % of group assets in % of group PBT from Greater China Greater China China China
A hard-landing scenario in China could impact Singapore banks directly and indirectly; DBS at most risk
28
26
8 5
Leveraging on liquid and underleveraged balance sheets, Singapore banks are in a strong position to bid for Asian assets that could be put up for sale as competitors look to rebuild their capital position. Along the lines of OCBCs acquisition of Bank of Singapore in 2010, Singapore banks are likely to focus on easily digestible strategic assets providing exposure to key growth markets and/or products. Singapore banks have avoided risky large-scale M&As since the controversial and expensive acquisition of Dao Heng by DBS in 2001 and we believe this will remain the case. The only exception would be a domestic merger as articulated in our 5 September 2011 report, DBS-OCBC pan-Asia bank could deliver scale, branding and ample room for synergies; our choice scenario is a DBS-OCBC pairing, which would offer DBS (as an acquirer) the opportunity to integrate and scale up highly synergistic platforms (life insurance, private banking and Islamic finance) while also acquiring a deep and scaled-
Singapore banks are well positioned to acquire strategic Asia-centric assets put up for sale; however, will shy away from large M&As
unless of safe and sensible nature such as our articulated DBS-OCBC merger scenario
24
Nomura | Banks
November 21, 2011
up ASESAN presence that would otherwise require expensive and integrationchallenging acquisitions to bridge. The merged banking group would rank well within the top-30 banks globally by market capitalisation and provide a distinct, wholly pan-Asian franchise headquartered in AAA-rated Singapore, boosting branding, customer acquisition and franchise valuation.
Fig. 42: DBS-OCBC: Asset split by geography (1H11)
Singapore Rest of Greater China 100% 80% 60% 40%
63.4% 63.1% 63.3% 4.0% 8.3% 19.3% 4.9%
South and South-east Asia Rest of the world

4.2% 5.2% 3.9% 23.6%
Hong Kong
4.1% 6.9% 12.4% 13.3%
20% 0% DBS
OCBC
DBS+OCBC
The medium-term capital positioning for the sector is strong MASs earlier and higher approach to BASEL III unveiled in June 2011 is already satisfactory on current core equity ratios, while decelerating loan growth and scrip-dividends boosting bank internal capital generation mean the recent pressure on capital ratios from the rapid asset growth will ease in FY12F. The regulatory challenges faced by Singapore banks are constant and regional ie, the pace of liberalisation in key growth markets such as India (where DBS is awaiting approval to establish a local subsidiary with branching rights) and potential reversal in others (eg, Bank Indonesia is mulling a 50% cap on single shareholding in banks). In the long term Singapore banks will also have to deal with a general rise in competition for retail deposits as foreign banks, traditionally funded via interbank and wholesale, make a push to build sticky retail deposits, most highly weighted under BASEL III requirements, for a stable balance sheet liquidity foundation (ie, via liquidity measures such as the Liquidity Coverage Ratio and Net Stable Funding Ratio to be introduced in 2015).
Fig. 43: Singapore Banks: Positioning for BASEL III
Ratios: (as at 3Q11) Core equity Tier 1: Total Tier 1: Total CAR:
BASEL III capital requirements are not an issue, but regional regulatory changes have a key bearing on strategic growth
The longer-term picture is one of rising funding cost as BASEL III liquidity measures force banks to build up retail deposit bases
DBS 10.90% 12.60% 15.50%
OCBC 11.20% 14.50% 15.90%
UOB 12.30% 14.00% 17.50%
Fig. 44: Valuation matrix

N o mur a T icker DBS SP C o mp any DBS Group Holdings R at ing Buy Buy Neutral M kt cap ( $mn) 23,360 22,200 19,728 Pr ice ( lo cal) 12.87 8.36 16.19 P/ E ( x) F Y 10 F Y 11F F Y 12 F 11.0 12.2 10.3 10.4 12.5 9.6 9.9 11.8 8.6 P/ B V ( x) F Y 10 F Y 11F F Y 12 F 1.1 1.3 1.2 1.0 1.3 1.1 1.0 1.2 1.0 Y ield ( %) F Y 10 F Y 11F F Y 12 F 4.4 3.6 4.3 4.6 3.6 4.9 4.8 3.8 5.6 R o A ( %) F Y 10 F Y 11F F Y 12 F 0.6 1.1 1.4 1.0 0.9 1.2 0.9 0.9 1.2 R OE ( %) F Y 10 F Y 11F F Y 12 F 6.3 11.3 13.3 10.3 10.4 11.9 10.5 10.5 12.5 EPS g r o wt h ( %) F Y 10 F Y 11F F Y 12 F 26.4 10.5 24.6 5.2 (2.6) 7.6 7.4 6.4 11.8
OCBC SP Oversea Chinese Banking Corp UOB SP United Overseas Bank
Source: Bloomberg, Nomura estimates (as of 15 November 2011)
25
Conglomerates/Industrials
CONGLOMERATES
EQUITY RESEARCH
New order growth to slow but remain healthy
November 21, 2011
Robust industry dynamics to underpin offshore E&P demand

Action: Reaffirm BUY on Keppel, Sembcorp Marine and Sembcorp Industries as offshore oil E&P (exploration & production) demand remains firm amidst new mega discoveries and upcoming multibillion dollar international capex tenders We believe recent significant new discoveries in the North Sea, the US Gulf and the Asia Pacific will likely sustain demand for offshore drilling and production. International oil majors and national oil companies such as ExxonMobil, Chevron, Statoil have made major discoveries (see figure below) which should spur demand for more drilling and production units. Also, stricter industry regulations governing offshore drilling following the Maconda oil spill incident in the US Gulf have swung demand even more in favour of new high-spec jack-up rigs which remain fully utilized and day rates at a premium. We expect Singapore yards to maintain their leading position in the jack-up and semi-sub newbuild segments, and in floating, production, storage and offloading (FPSO) conversions. Semi-submersibles replacement cycle to follow jack-ups We expect demand for deepwater semi-submersible newbuilds (the two leading Singapore yards have shared a +50% market share) to gather momentum over the next 12-18 months on strong take-up of newbuild semi-subs at the shipyards. As with the jack-up rigs, over 70% of the semisubmersible rig fleet is over 25 years old, with many being cold stacked. For instance, both Statoil and BP have indicated interest in new semi-sub charters and are in discussion with drilling contractors on their requirements, according to news reports from Upstream and Rigzone. Petrobras rig and production modules tender: Singapore yards key foreign partners Keppel and SMM are the only two foreign shipyards cited as potentially building 6 drilling units each (either semi-subs or drillships) in Petrobras 21 rig tender (see figure below). With a single unit likely to cost USD750800mn, by our estimates, six units could mean a potential USD4.8bn (SGD6.2bn) jump in new orders each for the two shipyards. Petrobras is also expected to call for tenders for production modules, where we expect the yards to once again play a key role. Recommendation and valuation We reiterate our Buy rating on Keppel (KEP SP, TP SGD11.10), Sembcorp Marine (SMM SP, TP SGD4.50) and Sembcorp Industries (SCI SP, TP SGD4.20 (TP under review)) as these are most geared to the firm offshore E&P cycle. As for the China-based, Singapore-listed shipbuilders, we rate Yangzijiang (YZJ SP, TP SGD0.85) Neutral, while Cosco Corp (COS SP, TP SGD0.69) is Reduce. Anchor themes While we maintain our longterm optimistic view on Singapore offshore rig builders with oil trading at well within capex-positive levels, we expect new order growth to slow over the next 6-9 months given macro trends are once again likely to disrupt the offshore rig replacement cycle in the short to medium term. Nomura vs consensus Our optimistic view on the Singapore O&M stocks is in line with consensus.
Research analysts Singapore Conglomerates Lisa Lee - NSL lisa.lee@nomura.com +65 6433 6979
Nomura | Conglomerates/Industrials
November 21, 2011
Key tables and charts

Petrobras tenders a key development to watch
Fig. 45: Petrobras aims to ramp up
Dec 10 Drilling rigs water depth >2000m Supply and special vessel Production platforms incl. FPSO Others (Jackets and TLWP) 15 287 44 78 By 2013 39 423 54 80 By 2015 37* 479 61 81 By 2020 65** 568 94 83
*Two rigs reallocated from international operations, expire in 2015, so it is not considered in the 2020 accumulated value ** The demand for long-term will be adjusted as new demand assessments are made Source: Petrobras, 26 Jul 2011 presentation (2020 Petrobras strategic plan), Nomura research
Fig. 46: Petrobras 21-rigs ender bids by companies with SETE Brazil as partner
Bidder Odebrecht Etesco Querioz Galvao Seadrill Odfjell Galvao Petroserv
Source: Petrobras
Bids 4 rigs @Odebrecht yard and 1 rig @Keppel FELS 3 rigs @Engevix yard and 2 rigs @Odebrecht yard 3 rigs @Keppel FELS 3 rigs @Jurong Shipyard (SMM) 3 rigs @Jurong Shipyard (SMM) 2 rigs @Keppel FELS
*Ocean rig is bidding on its own with 5 rigs at OSX or EISA yard
27
November 21, 2011
Leading indicators of newbuild orders

Fig. 47: Jack-up utilisation (worldwide)
100%
Fig. 48: Jack-up day rates GOM (300+ Cantilever)

(USD000) 200 150
90%
80%
100 50 0
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
70%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10 Jan-10
Source: ODS-Petrodata, Nomura research
Fig. 49: Semisub utilisation (worldwide)

100%
Fig. 50: Semisub day rates GOM (7500+)

(USD000) 700 600 500
90%
80%
400 300
70%
200 100
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Fig. 51: Number of jack-ups by delivery year

(# of units) 90 80 70 60 50 40 30 20 10 0
Fig. 52: Number of semisub by delivery year

(# of units) 25 20 15 10 5 0
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
28
Jan-11
60%
Jan-11
60%
November 21, 2011
New mega discoveries to raise demand for offshore drilling and production
Fig. 53: Significant YTD discoveries
Drilling Depth 4297m
Date 9-Feb-11
Company Chevron
Type Gas
Location Carnarvon Basin, W. Australia,100km NW of Barrow Island 70km offshore of Republic of Congo Hadrian North Prospect (KC9193), GOM, 250km SW of New Orleans 250miles SW of New Orleans, Gulf of Mexico GOM
Water Depth
Payload 74m of net gas pay, which 31m was encountered in a deeper, previously unexplored target interval in the Orthrus field 77m of gross reservoir for Marine 2 44m of gross reservoir for Marine 3 150m of net oil pay 475 ft of net oil pay and minor amt of gas 550ft of net oil pay and a minor amt of gas 500ft of net gas pay. Reserviors are expected to extend over the entire northern part of the structure. Potential for several trillions cubic ft of gas and associated condensates
25-Jan-11 8-Jun-11 8-Jun-11 8-Jun-11
Chevron Eni ExxonMobil ExxonMobil
Oil Oil Oil Oil
1800m 2100m 7000ft
9-Sep-11
Total
Gas
Caspian Sea, Absheron block, offshore Azerbaijan 70km offshore the Republic of Congo Norwegian continential shelf Peregrino South, Campos Basin, Brazil Srugard prospect, Barents Sea, Norwegian continental shelf Gullfaks south, North Sea 136m 3847m
25-Jan-11
Total
Oil Oil Oil Oil Oil
1800m
Gross oil reservoir of 77 and 44m each 65m oil columnn / Combined discovery in the 2 licenses totals between 500mn - 1.2b barrels of recoverable oil eq (est.) Oil column of 130m. 150 - 300mn barrels of recoverable oil eq is est. 150 - 250mn barrels of recoverable oil eq. is est 19 - 75mn barrels of recoverable oil eq is est
24-Aug-11 Statoil 14-Apr-11 1-Apr-11 9-Feb-11 Statoil Statoil Statoil
Source: Respective companies news releases
Valuations
Fig. 54: Valuations Conglomerate
Ticker KEP SP SCI SP STE SP Price ($) 15-Nov-11 9.30 4.32 2.85 Rating BUY BUY BUY Price PER (x) PBV (x) Target ($) FY11F FY11F 11.10 11.3 1.9 4.20 3.90 11.7 15.6 1.8 4.7 Yield (%) FY11F Nomura Comments 4.5 Strong new orders to underpin asset value SMM to underpin marine orders while utilities business to provide stable 3.5 cashflows 5.1 Defensive earnings with sustainable dividend yield of 5% Building ASEAN franchise in softdrinks and dairies. Strong beer position in Asia. Property exposure mitigated by low land costs and limited 2.7 inventory in Singapore. New orders help support orderbook. Strong balance sheet to sustain 4.0 dividends Bulk carrier supply glut continues while shipbuilding margins remain 4.3 depressed. Negative shipbuilding outlook and high risk investment strategy into opaque, held-to-matuirty investments a concern, though partially 4.9 mitigated by strong execution capabilities
Keppel Corp SembCorp Ind* ST Engineering
Fraser & Neave SembCorp Marine* Cosco Corp
FNN SP SMM SP COS SP
6.26 4.02 0.94
BUY BUY REDUCE
7.29 4.50 0.69
14.9 13.0 11.9
1.3 2.8 1.8
Yangzijiang Shipbuilding *
YZJ SP
0.96 NEUTRAL
0.85
5.4
1.5
Source: Bloomberg, Nomura research, pricing as at 15 Nov 2011
*Earnings and price target under review
29
Plantations/Commodities
CONSUMER RELATED
EQUITY RESEARCH
2012F outlook
November 21, 2011
Fundamentals still intact; resilient CPO demand and planter profitability

Supply-demand balance remains favourable Based on channel checks, the supply-demand outlook for vegetable oils and oilseeds is likely to tighten. Palm oil supply growth should slow down in 2012F after a very strong showing in 2011 (YTD record CPO production), a result of tree stress, a high base in 2011, and possibly heavier-than-normal rains (caused by La Nina) affecting harvesting. Earnings likely to remain resilient in 2012F; we are positive on the sector We estimate average CPO prices to moderate slightly to ~RM3,000-3,100/ mt in 2012-13F, on the back of slower demand growth and a stronger dollar (vs previous expectations). However, we also expect plantations to continue exhibiting their resilient profitability profile. In an environment of slower price momentum, planters with a high % of immature and young hectarage remain the best option, in our opinion. Valuations for Indonesian planters listed on SGX remain amongst the most attractive regionally. Theme 1: Indonesian consumption Whilst Indonesia is the largest producer of palm oil, it is also the secondlargest consumer. Indonesian palm oil consumption has grown above the world average for the past five years, at almost double Chinas rate. At current growth rates, palm oil consumption in Indonesia is likely to outstrip Indias in 4 years. Theme 2: Indonesian refining The recent change in export taxes has shifted the profitability of Indonesian refiners substantially upwards when compared to their Malaysian counterparts. Together with the increasing demand for higher quality palm oil products in Indonesia itself, this could be the start of a substantial build-up in refining and downstream capacity in Indonesia.. Theme 3: Demand concerns With the risks of fallout from China and Europe increasing, there is likely to be greater uncertainty on demand. However, demand disappointment is likely to be significantly mitigated by the easing of cost pressures, which have been a substantial driver of the higher ASPs seen this year.
Fig. 55: Stocks for action
Stock Olam Golden Agri Indofood Agri Wilmar Mewah Ticker OLAM SP GGR SP IFAR SP WIL SP MII SP Rating BUY BUY BUY NEUTRAL REDUCE Last price(SG$) 2.44 0.67 1.33 5.19 0.47 Price target(SG$) 3.5 0.96 3.4 5.9 0.5 Upside/(downside) 43% 43% 156% 14% 6%
Anchor themes The palm oil supply-demand balance outlook appears particularly supportive after a strong 2011 (following a very weak 2010). We expect supply growth to moderate further in 2012F, in line with expectations of planters we have met with (excluding the smaller ones that are likely to experience substantial growth from newly maturing hectarage). Nomura vs consensus We are lower on average CPO price for 2012F and 2013F
Research analysts ASEAN Agri-Related Tanuj Shori - NIHK tanuj.shori@nomura.com +852 2252 1407 Muzhafar Mukhtar - NSM muzhafar.mukhtar@nomura.com +60 3 2027 6891 Jit Soon Lim, CFA - NSL jitsoon.lim@nomura.com +65 6433 6969 Archit Singhal - NSFSPL archit.singhal.1@nomura.com +91 22 672 35537
Source: Bloomberg, Nomura estimates, Closing price as on 15-Nov
Nomura | Plantations/Commodities
November 21, 2011
Plantations 2012 outlook

Supply-demand balance for palm oil expected to remain supportive
Global stocks of vegetable oils are at low levels, relative to consumption. Based on OilWorld forecasts, the supply-demand balance for vegetable oils is likely to tighten further in 2012, with the stock usage ratio falling to 11.4% in October 2011-September 2012 from 12% in October 2010-September 2011. Further, whilst oilseed stocks are relatively high compared to recent years, production over the next year is expected (USDA estimates) to fall behind consumption, primarily due to lower soybean harvests, which should see the stock usage ratio for oilseeds fall further to 18% from 19.8%. Soybean production is already expected by USDA to fall next year; should a strong La Nina event develop in the next few months, key producing areas in southern Brazil and Argentina may see dryness affecting harvests and/or new plantings (the latter would affect South American harvests for 2013 since the regions harvesting period is in March and April).
Fig. 56: Supportive outlook for palm oil
Palm oil supply-demand balance
Opening stocks Production Total supply Total consumption Ending stocks Stock usage Supply growth Demand growth
mn MT mn MT mn MT mn MT mn MT % % %
2005 5 34 39 34 5 16% 10% 11%
2006 5 37 43 36 5 15% 10% 8%
2007 5 39 44 38 6 16% 4% 5%
2008 6 43 49 43 7 16% 11% 12%
2009 7 45 52 45 7 16% 6% 6%
2010 7 46 53 46 7 15% 1% 3%
2011F 7 50 57 49 8 16% 7% 5%
2012F 8 51 59 51 8 16% 4% 4%
Source: MPOB, Direktorat Jenderal Perkebunan, OilWorld, USDA, Nomura estimates
The palm oil supply-demand balance outlook is also particularly supportive; after a strong 2011 (following a very weak 2010), we expect supply growth to moderate further in 2012, in line with the expectations of planters we have spoken with (except for the smaller ones, which are likely to experience substantial growth from newly maturing hectarage). At the moment, we believe this will be mainly due to both biological stress, and a relatively high base in 2011 (expected to reach a record high supply of 57mn mt by OilWorld). Although no Indonesian planters have seen any signs of tree stress, some of the Malaysian players have already begun to see an increasing proportion of male flowers since August. We believe this to be a result of the weak-to-moderate El Nino in May 2009 - May 2010, which may have affected Malaysia more than Indonesia (sex selection of flowers occurs ~24 months prior to fruit ripening). A stronger-than-expected La Nina could also affect harvesting between December and March.
Theme #1: Indonesian consumption

With palm oil being a commodity, traditionally the key competitive advantages for planters have been cost management, supply reliability/ease (especially in Indonesia where access to suitable infrastructure is a key issue for both CPO (Crude Palm Oil) production and sales), and access to end markets (refining & downstream capacity, and distribution networks, ie, degree of vertical integration). Going forward, we believe the quality of CPO output (including the consistency of that quality), and the ability to process that CPO into higher value output will become increasingly important, which is tied to the increasing wealth of the Indonesian population. While Indonesia produces 50% of world output, it is often forgotten that it is also the second-largest consumer,
31
November 21, 2011
taking up 13% (10% food, 3% industrial) domestically. In the past five years, Indonesian consumption of palm oil has accelerated to a CAGR of 8%, higher than the global average of 7% and Chinas 4%. If current consumption growth rates continue, Indonesia is likely to emerge as the largest consumer of palm oil in four years. Why do some individuals consume more vegetable oils as they become wealthier? We believe there are two main reasons: Less recycling: As some individuals become wealthier, they re-use cooking oils less, directly or indirectly. Higher end products: as the populations wealth increases, the demand for higherquality items increase, which means the quality standard for basic items (like cooking oil, margarine) increases, and demand for more discretionary products (chocolates/confectionaries, cosmetics, soaps/detergents, biofuel) increases.
Fig. 57: Vegetable oil per capita consumption
60
Fig. 58: Palm oil per capita consumption

35
Per Capita Consumption (1000 MT/Mn people)
Per Capita Consumption (1000 MT/Mn people)
50 40 30 20 10 Nigeria Pakistan China Bangladesh India Indonesia EU 27
US
30 25 20 15 10 5 0 -5 -10,000 Thailand Pakistan Nigeria India China 10,000 30,000 50,000 70,000 US Indonesia EU 27
0 -20,000
20,000
40,000
60,000
Per capita Income (USD)

Source: USDA, World Bank Source: USDA, World Bank
Per capita Income (USD)
For Indonesia, this would likely be reflected in consumption of palm oil, the dominant vegetable oil. Both of these changes are likely to require better quality CPO, whilst the latter should also mean increased refining/downstream capacity. We are already seeing the higher-quality requirement; <3% FFA content for CPO is now considered the industry norm, vs 5% a few years ago. As such, the increase in per-capita palm oil consumption is also likely to be accompanied by an increase in the quality of palm oil consumed, and greater demand for palm oil products higher up the value chain.
32
November 21, 2011
Theme #2: Indonesian refining

Fig. 59: Midstream advantage in Indonesia at the moment
Difference between Indonesia and Malaysia: spread between CPO and refined CPO fractions, and local CPO prices
(USD/mt) 300 200 100 0 -100 -200 -300
ID-MY: Refining+fractionating margin ID-MY: CPO local feedstock prices
5-Jan-07
5-Jan-08
5-Jan-09
5-Jan-10
5-Jan-11
5-Jul-07
5-Jul-08
5-Jul-09
5-Jul-10
Source: Bloomberg, Nomura estimates
On top of this bullish backdrop, refining is now significantly more profitable in Indonesia than in Malaysia under the new export tax structure. Unless the Indonesian government reverses the changes, there is a very strong incentive to build refining and downstream capacity in Indonesia, where export taxes are lower, feedstock prices are lower, and domestic demand is on a strong uptrend.
Theme #3: Demand concerns

Our global economics and strategy teams recently analysed the hypothetical impact of a hard landing in China (defined as growth slowing down to 5%), for which we see a one in three chance of occurring. Fallout from this or European sovereign debt troubles would clearly affect both market valuations and earnings for plantations. We note, however, that in hard times, palm oils affordability tends to confer some protection to planters whilst prices may take a hit, some of the impact is buffered by higher selling volumes as consumers switch to cheaper oils due to a certain degree of substitutability. Furthermore, we see demand concerns mitigated by the implied easing of cost pressures roughly 50% of the cost of production is tightly correlated with the price of crude oil (~40% fertiliser, ~10% transport), which is in turn closely correlated with the global economic outlook. Looking back at the experience of 2008, when CPO prices touched ~RM1400/mt, the earnings performance of pure planters suggest that the intrinsic cost advantage of oil palm (arising from its very high yield per ha) makes it very hard for established planters to lose money. Current upstream gross profit margins of ~50-60% (CPO at ~RM3000/mt, with cash cost of production at ~RM1,100) leave plenty of breathing space.
Risks to our view

These include a slower-than-expected growth in demand, which also involves the risk of less aggressive biofuel policies in Europe, and supply coming in stronger than expected (since current prices are likely already largely pricing in slower supply growth in 2012F).
5-Jul-11
-400
33
November 21, 2011
Fig. 60: Even in the depths of 2008, upstream margins were resilient as a large portion of costs tracked ASPs downwards
Average EBIT margin (RHS) vs Average CPO price
Fig. 61: In the long term, the margin resilience of upstream players has been significant
Average EBIT margin (RHS) vs Average CPO price
(MYR/mt) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Ave CPO price Integrated
Pure planters
(%) 45 40 35 30 25 20 15 10 5 0
(MYR/mt) 3,500 3,000 2,500 2,000 1,500 1,000 500 0
Ave CPO price Integrated
Pure planters
(%) 60 40 20 (20) (40) (60) (80)
Source: Bloomberg
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Source: Bloomberg
CPO price outlook

Fig. 62: Nomura CPO price estimates
Ave Malaysia FOB Spot USD/mt 2011 1,083 2012 1,013 2013 1,034
Source: Bloomberg, Nomura
RM/mt 3,266 3,083 3,075
Ave USD/MYR 3.05 3.05 2.97
Assumptions Ave Brent 110 105 100
MY PO stock y-y 11% 5% 8%
Based on our current expectations for the supply-demand balance, exchange rate and crude oil prices, we estimate average CPO prices will be slightly weaker in 2012F and 2013F, at ~RM 3,100/mt compared to 2011F (RM3,257 /mt). However, we also note that even with the very strong production growth seen in 2011 (which is expected to help the stock usage ratio rise in 2011F to 16% from 15% in 2010), and widespread concerns of another recession, the lowest CPO has touched is RM2,787 /mt.
Smaller Indonesian planters appear to offer best earnings upside

Our lower average CPO price estimates for 2012F and 2013F imply that volume growth will be the key determinant for planters earnings momentum. In our view, the best positioned will be those benefiting from the highest % of maturing hectarage (immature and young trees, as the FFB yield for this group increases very rapidly from zero at ~three years after field planting to ~24mt/ha at seven to eight years). We believe the smaller planters (eg, First Resources, Genting Plantations, BWPT, Gozco) are thus better positioned to show earnings growth in an environment of slightly lower average CPO prices, but some big caps like Astra Agro, KLK, IFAR/SIMP have very decent young/immature hectarage proportions as well.
FY1993 FY1994 FY1995 FY1996 FY1997 FY1998 FY1999 FY2000 FY2001 FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010
34
November 21, 2011
Fig. 63: Strongest earnings growth from companies with biggest proportion of immature (0-3 years) or young (4-8 years) hectarage
Company Ticker Young Immature Total Growth index
First Resources FR SP 37% 55% 92% 1.14
BWPT BWPT IJ 64% 12% 76% 0.81
Genting Plantation GENP MK 10% 36% 46% 0.61
Gozco Plantation GZCO IJ 1% 40% 41% 0.57
Astra Agro AALI IJ 20% 27% 47% 0.58
KLK Indo Agri PT SIMP KLK MK 27% 20% 47% 0.55 IFAR SP 13% 24% 37% 0.47 SIMP IJ 12% 24% 37% 0.47
Sampoerna Agro SGRO IJ 11% 25% 36% 0.46
Golden Agri GGR SP 24% 13% 37% 0.43
London Sumatera 14% 12% 26% 0.31
Sime Darby IOI Corp IOI MK 8% 11% 19% 0.23 11% 10% 21% 0.25
LSIP IJ SIME MK
Note: Index formed by product sum of young and immature hectarage %, and index scores (1 for young, 1.4 for immature) Source: Company data
Valuations still appear to be favouring Indonesian planters

With much stronger earnings growth potential than their Malaysian peers, Indonesianbased planters (eg. GGR SP, IFAR SP, FR SP) look more attractive, showing a median PB/ROE (CY12F) of 0.09 (SGX listed) and 0.10 (IDX listed), vs 0.11 for Malaysia. We prefer to look at PB / ROE, which has a much better correlation compared to P/E and EPS growth (even after adjusting for risk).
Fig. 64: Valuation comparison
Name Ticker Rating Buy Buy Buy Buy Not rated Not rated Not rated Not rated Not rated Not rated Not rated P/E EV/EBITDA P/B Div yield P/CF PB/ROE 2-yr EPS PEG Price Mcap CY11F CY12F CY12F CY11F CY12F CAGR CY12F CY11F CY12F CY11F CY12F CY11F CY12F LC USDm 8.91 16,963 2.3 2.1 0.12 14.3 12.8 41 0.32 8.9 8.0 3.7 4.3 14.0 10.4 5.11 10,397 2.6 2.4 0.12 14.1 12.5 17 0.72 10.8 9.8 2.6 3.1 11.4 10.0 21.08 7,129 3.4 3.0 0.13 15.7 13.2 25 0.54 10.5 9.0 3.8 4.6 14.4 12.2 8.12 1,952 1.9 1.6 0.12 13.9 12.4 24 0.52 9.2 8.1 1.6 1.8 13.3 11.8 2.70 684 1.2 1.1 0.10 9.0 10.3 11 0.90 6.6 7.4 6.6 5.9 n.a n.a 2.65 673 1.5 1.4 0.14 13.1 12.8 12 1.06 7.9 7.7 3.3 3.5 10.0 11.4 3.58 600 1.0 0.9 0.08 7.2 8.1 22 0.37 5.0 5.4 3.4 3.4 4.8 5.2 4.48 616 1.7 n.a. n.a. 8.5 10.5 11 0.98 4.8 5.7 1.0 0.9 n.a n.a 3.50 461 1.8 1.6 0.13 12.8 12.2 25 0.49 10.8 10.2 2.1 2.2 16.3 15.6 6.63 426 1.3 1.2 0.11 13.1 11.3 27 0.42 n.a n.a 4.6 5.2 39.7 185.9 8.43 245 1.2 1.1 n.a. 9.3 7.9 31 0.25 8.7 5.7 4.8 5.9 n.a n.a 1.8 1.7 0.12 11.9 11.3 22.3 0.6 8.3 7.7 2.9 3.1 15.5 32.8 1.7 1.5 0.12 13.1 12.2 23.9 0.5 8.8 7.9 3.3 3.4 13.7 11.6 0.67 1.33 1.48 0.35 6,286 1,479 1,680 311 0.8 1.0 2.0 1.2 1.2 1.1 4.5 2.9 3.6 2.3 3.3 3.3 0.8 0.8 1.7 1.1 1.1 0.9 3.9 2.6 2.9 2.0 2.8 2.7 0.09 0.05 0.09 0.12 0.09 0.09 0.11 0.10 0.12 0.09 0.10 0.10 10.5 6.3 11.2 20.8 12.2 10.8 12.7 11.4 14.3 9.4 12.0 12.1 9.0 5.9 10.2 14.2 9.8 9.6 11.2 10.6 11.4 9.8 10.8 10.9 34 37 9 (7) 18.1 21.2 33 19 30 15 24.3 24.6 0.27 0.16 1.20 n.a 0.5 0.3 0.34 0.57 0.38 0.66 0.5 0.5 7.2 4.9 7.2 12.9 8.0 7.2 8.3 7.2 10.8 5.8 8.0 7.7 6.3 4.4 6.6 9.9 6.8 6.5 7.3 6.7 9.0 5.9 7.2 7.0 1.2 0.0 1.4 0.4 0.8 0.8 5.1 4.0 0.8 2.8 3.2 3.4 1.2 0.0 1.6 0.0 0.7 0.6 5.8 4.7 1.1 3.3 3.7 4.0 10.4 4.5 9.9 19.3 11.0 10.1 11.1 8.8 12.2 7.2 9.8 9.9 8.6 4.8 8.2 15.9 9.4 8.4 9.3 8.5 9.0 7.6 8.6 8.7
Sime Darby SIME MK Ioi Corporation IOI MK Kuala Lumpur Kepong KLK MK Genting Plantations GENP MK Hap Seng Plantations H HAPL MK Ijm Plantations Bhd IJMP MK Tradewinds Plantation BTWPB MK Sarawak Oil Palms BerhSOP MK Tsh Resources Bhd TSH MK United Malacca Bhd UMR MK Chin Teck Plantations B CTP MK Average (Malaysia) Median (Malaysia) Golden Agri-Resources GGR SP Indofood Agri ResourcesIFAR SP First Resources Ltd FR SP Kencana Agri Ltd KAGR SP Average (Singapore) Median (Singapore) Astra Agro Lestari AALI IJ Pp London Sumatra LSIP IJ Bw Plantation Tbk Pt BWPT IJ Sampoerna Agro Tbk Pt SGRO IJ Average (Indonesia) Median (Indonesia) Regional Average Median Min Max
Buy Buy Not rated Not rated
Buy Buy Not rated Not rated
22,600 2,275 1,170 3,075
3,946 1,721 524 644
2.0 1.8 0.8 4.5
1.8 1.6 0.8 3.9
0.11 0.11 0.05 0.14
12.0 12.7 6.3 20.8
10.9 11.2 5.9 14.2
21.8 23.9 (6.9) 40.6
0.6 0.5 0.2 1.2
8.2 8.1 4.8 12.9
7.4 7.4 4.4 10.2
2.5 2.6 0.0 6.6
2.8 3.1 0.0 5.9
13.0 11.2 4.5 39.7
20.9 9.6 4.8 185.9
Source: Bloomberg, Nomura estimates. Prices as at 15 Nov 2011
Mid-stream: Olam at the lower end of trading range, we remain cautious on Wilmar and negative on Mewah
Mid-stream names are coming out of weak results in the last quarter (except Olam) and are at their trading lows in terms of both absolute price and one-year rolling forward P/Es. Historical analysis suggests that these names tend to trade within a band (and the band continues to shift higher as earnings ramp up happens) and thus it is profitable to enter these stocks at the lower end of the range. Olam is now trading at 14.5x, Mewah is at 8x and Wilmar is at 15x CY12 P/E. YTD, these names have corrected sharply Olam is down 24% and Mewah is down 55%.
35
November 21, 2011
In our view, these are good levels for investors to build up positions as the fundamentals look right commodities have been a bit weak but they do not necessarily impact next years earnings (apart from almonds for Olam). Plus the credit tightening, if it happens, would be more negative for smaller players, and bigger firms such as Olam and Wilmar should gain market share. We would recommend BUYing Olam but remain NEUTRAL on Wilmar and REDUCE on Mewah. We like Olam as an earnings growth story, and we still see downside risks with Mewah; Wilmar, in our view, is still expensive for its midteen growth and low RoEs.
Fig. 65: YTD mid-stream performance
(%) 20 10 0 -10 -20 -30 -40 -50 -60
May-11 Nov-11 Jan-11 Jun-11 Mar-11 Feb-11 Jul-11 Aug-11 Sep-11 Oct-11 Apr-11
Wilmar
Olam
Mewah
STI
-70
Source: Bloomberg
Fig. 66: US Crop harvest progress Above average

Harvest above/below 2006-2010 average Above Above Above Above Above
% of Harvest Cotton Corn Soybeans Rice Winter Wheat

Source: USDA- 9-Nov
Nov 6,2010 69 95 98 98 95
Nov 6,2011 2006-2010 Average 70 53 87 73 92 88 97 97 94 92
From a stock-specific perspective: Mewah: Valuations at ~8x FY12F P/E might look inexpensive, but are misleading given that a downward revision to estimates is increasingly possible, in our view. We maintain our Reduce recommendation we believe the current rally provides investors with a good point to exit the stock. As well, a lot of policy uncertainty exists regarding what measures the Malaysian government will take to address the export duty differential with Indonesia, which we believe will impact the margins of Malaysian refiners like Mewah beginning 4QFY11F. Olam: Trading at ~14x CY12 P/E, we believe there is a potential to re-rate going forward. We maintain Olam as our top pick, given its significant implied earnings growth and diversified and niche market business, which lends advantage in these markets. Olams valuation looks attractive, given a 27% FY11-14F earnings CAGR (and 32% CAGR if it were to achieve its US$1bn target). Wilmar is trading at ~16x FY12F earnings, which does not look cheap, given peers trading levels (plantations at ~10-13x, Olam at 14x CY12) and macro uncertainty. In addition, management still raises the subject of investing in property and equity markets and rolling RoE has now dropped to just ~10%. We believe these multiples do not leave much room for upside, considering the strategy/return overhang and macro. We maintain our Neutral rating recommendation.
36
November 21, 2011
Fig. 67: Valuations

Price (S$)* Olam International Wilmar International OLAM SP Rating Yield Price PBV Nomura Comment PE (x) Target (x) (%) (S$) FY12F FY12F FY12F 3.50 16 1.9 1.7 Stock looks attractive post dilution, at 15x CY12 P/E Wilmar is trading at ~15x FY12F earnings.We believe these multiples do not leave much room for upside considering the strategy/return overhang and macro. Maintain Neutral Valuations at ~8x FY12F P/E might look inexpensive, but are misleading given that a downward revision to estimates is increasingly possible, in our view. Maintain REDUCE we think that the current rally gives a good point to exit the stock.
2.43 Buy
WIL SP
5.27 Neutral
5.90
15
1.8
1.7
Mewah
MII SP
0.48 Reduce
0.50
0.9
1.3
Source: Bloomberg, Nomura estimates. Priced as of 14-Nov 2011
37
Gaming
GAMING, HOTELS & LEISURE
EQUITY RESEARCH
All eyes on China
November 21, 2011
Recent 3Q earnings indicate moderate industry growth; VIP segment was the key driver
The casino gaming industry grew 11% qoq In line with our expectation, casino gaming revenue moderated to 11% q-q growth in 3Q, from 2Q this year. Growth in the VIP segment continues to outpace that in the mass-market segment. Looking ahead, we believe that the three key drivers are: Anchor themes Unlike in Macau, the Singapore government has no plans to make Singapore a gambling hub. Expectations on market size must be realistic, in our view. Nomura vs consensus Our FY12F earnings estimates for Genting Singapore are 23% below consensus.
Research analysts Malaysia Gaming, Hotels & Leisure Wai Kee Choong - NSM waikee.choong@nomura.com +60 3 2027 6893 Raashi Gupta - NSFSPL raashi.gupta@nomura.com +91 22 4053 3779
VIP business. With a relatively small domestic market size, contribution

from overseas VIP players is becoming an important driver. Unfortunately, the growth potential in the VIP business in Singapore is capped by the non-existence of junket operators who have been instrumental in driving gaming revenue growth in Macau by providing credit to VIP players. Until junket licenses are issued, gaming revenue growth would likely be capped at the 10% level, in our view.
Visitor arrivals. Another key growth driver is the increase in visitor

arrivals into Singapore. In the year up to the end of September, monthly visitor arrivals to Singapore averaged above 1mn, a big contrast to 2010s tourism monthly statistics in which the 1mn mark was breached only twice July (1.09mn) and December (1.13mn). We believe tourist arrivals to Singapore could at least hit 13.4mn, implying an impressive 14% rise in 2011F. Based on historical trends, we see upside surprises to 2011 arrival figures due to seasonality factors. Although visitors from China have increased significantly this year, Septembers statistics were disappointing, dragged down mainly by a 14% m-m fall in visitors from Asia. The main culprit was the 43% m-m drop in visitors from China. The 104,145 Chinese visitors statistic is the lowest since June this year and is 24% below the YTD average of 136,621 monthly visitors.
Regulatory risks. Unlike in Macau, Singapore government has no plans

to make Singapore a gambling hub, in our view. Therefore, one of the key concerns has been regulatory, involving raising the entry levy for locals. In any case, assistance is stepping up to help hardcore gamblers from entering the casinos. According to Singapores Ministry of Community Development, Youth and Sports, in 3Q11 there were 750 family exclusion orders (+22% from 2Q), 28,600 third-party exclusions (+0.3% from 2Q) and 29,000 self exclusions (+60.7% from 2Q). In total, there were 58,350 exclusions as at Sept 30, up 24% from 47,178 as of June 30. Foreigners accounted for 39% of total exclusions. The biggest jump was seen in the self-exclusion category, where 60.7% more people asked for help from the National Council on Problem Gambling (NCPG).
Fig. 68: Stocks for Action
Stock GentingSingapore Ticker GENSSP Rating REDUCE Price on Nov 14 (SGD) 1.59 Price Target (SGD) 1.41 Upside 11.3% P/E FY11F 19.9 P/E FY12F 20.7
Source: Nomura Research, Bloomberg
Nomura | Gaming
November 21, 2011
Changing landscape for Singapores tourist arrivals?

The openings of the two Integrated Resorts since February 2010 seem to have had a very positive effect on the Singapore tourism industry. The recent tourist arrival statistics for Singapore suggest that structural changes could be taking place on two counts. In the year up to the end of September monthly visitor arrivals averaged an unprecedented 1.09mn. Except for February, visitor arrivals have been averaging above the 1mn mark throughout the year; and The proportion of Indonesian and Chinese tourists in Singapore has been rising. However, for September the visitors from China saw a 43% decline m-m which caused a 12% m-m decline in overall tourist arrivals in Singapore. The statistic of 104,145 Chinese visitors was the lowest since June this year and was 24% below the YTD average of 136,621 monthly visitors from China. Unlike in Macau, where data points are easily available, investors in general are increasingly disappointed with the lack of news flows and data points available with regard to Singapores gaming industry. While it is still too early to conclude, there is a possibility that by the end of 2012F the mainland Chinese could overtake the Indonesians as the biggest tourist group visitors to Singapore.
Fig. 69: Tourist arrivals in Singapore since 2005 Fig. 70: The top contributing regions for tourist arrivals in Singapore, YTD
('000) 1,400 1,200 1,000 800 600 400 200 Others, 35%
Indonesia, 20%
China, 12%
Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11
Europe, 10%
Malaysia, 8% India, 7% Australia, 7%
Source: Singapore tourism board, Nomura research
Fig. 71: Tourist arrivals from the major regions, YTD

Others, 9% Americas, 4% Europe, 10% West Asia, 1% South Asia, 8% ASEAN, 41%
Fig. 72: Tourist Arrivals from ASEAN countries, YTD

Other Countries in Southeast Asia, 0.8%
Vietnam, 6.5%
Brunei Darussalam , 1.1%
Thailand, 8.8% Philippines, 12.6% Myanmar, 1.8% Malaysia, 20.4%

Indonesia, 48.1%
North Asia, 26%

39
Nomura | Gaming
November 21, 2011
More people are saying no in 3Q

While the tourism industry has been flourishing, more gamblers are turning themselves in to be barred from entering the casinos. According to the Ministry of Community Development, Youth and Sports, there were 750 Family Exclusion Orders, 28,600 thirdparty Exclusions and 29,000 self-Exclusions as of the end of September. In total, 58,350 Exclusion Orders were issued by the National Council on Problem Gambling (NCPG). Foreigners accounted for 39% of the total exclusions. The exclusion orders are 24% up from the 47,178 recorded as of the end of June 2011. Family Exclusion orders rose 22% from 2Q, 28,600 third-party Exclusions (+0.3% from 2Q) and 29,000 self-Exclusions (+60.7% from 2Q). In total, the 58,350 Exclusions as of September 30 were up 24% from the 47,178 as of June 30. The biggest jump was seen in the self-Exclusion category where 60.7% more people asked for help from the NCPG. Singapore boasts a small population base. The segment of population between ages 2179 is estimated at 2.45mn people. The target market for the two casino operators is rather limited. Looking at Malaysias experience in which hardcore gamblers formed less than 5% of the legalized population base, the 58,350 Exclusion Orders are a huge number when put in the perspective of the percentage of estimated hardcore gamblers present in Singapore. Assuming that a similar 5%, or 122,500, of the 2.45mn are hardcore gamblers, the 58,350 Exclusion Orders work out to almost half of the market potential. With Singapores limited population base, we think that the growth potential for the two casinos hinges on the VIP segment. In Macau over 70% of the volume gambled is from VIPs funded by junket operators. Without any junket operators, the VIP business in Singapore is likely to pale in comparison to Macaus stronger growth potential.
Fig. 73: Singapores resident population by age group, gender and ethnicity, June 2010
Chinese ('000)
Indians ('000)
Others (excluding Malays '000)
Females
33 45 53 88 110 131 138 137 147 140 123 101
1245
85 & Over 80-84 75-79 70-74 65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29 20-24 15-19 10-14 5-9 0-4 150 120 90 60 30 0 30 60 90 120 150
Males
25 39 49 86 111 134 141 135 140 129 112 101
1203
2.45mn
Source: Department of Singapore statistics, Nomura research
40
Nomura | Gaming
November 21, 2011
Gaming revenue correlation with GDP growth

Owing to a lack of historical data on Singapores casino industry, we look to Malaysias historical casino revenue growth patterns to get a sense of what could happen to Singapores gaming revenue growth during recessions. Our analysis suggests that Malaysias gaming revenue growth entered negative territory only three times over the past ten years in 3Q04: -2.1% y-y; in 4Q04: -2.9% y-y; and in 2Q09 :-4.7% y-y. The fall in gaming revenue in 2004 was, we think, mainly a result of the SARS (Severe Acute Respiratory Syndrome)-led recession as foreign visitor arrivals plunged. Gaming revenue growth remained in positive territory during the recessions of 2008 and 2009. The relatively defensive nature of casino revenue growth in Malaysia could be attributed to the benefit of having a significantly larger proportion (~90%) of its visitors being primarily domestic visitors who visit casinos regularly. In the case of Singapore, casino gaming revenue may not be as defensive as other gaming-related revenue, such as four-digit number ticket sales, horse racing, Toto, Singapore Sweep and Football, which have all held up quite well during the last few recessions. Unlike in Malaysia, Singapores casinos, which have a high proportion of their revenue coming from VIP gamblers, tend to be more vulnerable in tough times.
Fig. 74: Revenue growth trend in Singapore since 2010
1,600 1,400 1,200 1,000 800 600 400 200 0 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Source: Company data, Nomura Research
Total Singapore casino revenue
% Growth (q-q)
16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4%
Sensitivity to possible downturn

RWS (Resorts World Sentosa) started its operations only in 2010. Owing to a lack of historical data on Singapores casino industry, we look to Malaysias last 40 quarters of casino revenue growth patterns to get a sense of what could happen to Singapores gaming revenue growth during recessions. Our analysis suggests that Malaysias gaming revenue growth entered negative territory only three times over the past ten years in 3Q04: -2.1% y-y; in 4Q04: -2.9% y-y; and in 2Q09 :-4.7% y-y. The fall in gaming revenue in 2004 was, we think, mainly a result of the SARS (Severe Acute Respiratory Syndrome)-led recession as foreign visitor arrivals plunged. Gaming revenue growth remained in positive territory during the recessions of 2008 and 2009. The relatively defensive nature of casino revenue growth in Malaysia could be attributed to the benefit of having a significantly larger proportion (~90%) of its visitors being primarily domestic visitors who visit casinos regularly.
41
Nomura | Gaming
November 21, 2011
Fig. 75: Revenue growth of GENM v/s the Malaysia GDP growth (y-y)
35% 30% 25% 20% 15% 10% 5% 0% -5% -10% -15% Revenue growth y-y GDP growth y-y
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
Source: Company data, Department of Statistics Malaysia
Our base-case assumption for 2012F is +10% growth

In the case of Singapore, casino gaming revenue may not be as defensive as other gaming-related revenue, such as four-digit number ticket sales, horse racing, Toto, Singapore Sweep and Football, which have all held up quite well during the last few recessions. Unlike Malaysia, Singapores casinos, which have a high proportion of their revenue coming from VIP gamblers, tend to be more vulnerable in tough times.
Fig. 76: GENS Sensitivity analysis of FY12F earnings to changes in sales
Revenue change (FY12F) -15% 695 -29% -10% 751 -23% -5% 807 -17% 5% 920 -6% Base case 10% 976 0% 15% 1032 6%
Estimated net earnings (MYR mn) % change

2Q11
42
Property
PROPERTY
EQUITY RESEARCH
Transactions to underpin valuation reassessment
November 21, 2011
Top picks = CMA, CCT; still more cautious on CMT

Action: Top picks = CMA, CCT; more cautious on CMT Both developers and REITs have underperformed the broader FSSTI index in 2011, with the latter by a smaller extent. We see three potential themes playing out in the physical property market in 2012F: 1) a significant rise in unsold inventory in the private housing market, 2) more sales of partial stakes at office properties, and 3) the perceived defensiveness of suburban retail properties being challenged. While inventory build-up has historically been negative for developers, FY12F P/B of 0.9x suggests low market expectations could provide room for developers to outperform, should incremental news be less negative than expected. Our top picks for the sector going into 2012F are CMA and CCT. We remain relatively more cautious on CMT. Catalyst: transactions to underpin valuation reassessment Transaction benchmarks should continue to provide catalysts for the market to reassess the valuation currently ascribed to the portfolios of CMA and CCT. In addition, the turnaround of CMAs associate malls in China will likely be a key re-rating catalyst for the stock; we believe CCT will be able to outperform if its portfolio vacancy was to hold up better than what the market is currently expecting. On the other hand, weaker rental demand could amplify the supply situation in the retail property market, translating into slower lease-up at CMTs upcoming new malls, even though its core portfolio may still perform well. Valuation: CMA at 0.6x NAV, CCT at SGD1,451psf for SG office Developers are trading at FY12F P/B of 0.9x, vs. the historical mean of 1.3x, while REITs are trading at FY12F yield of 6.7%, vs. a historical mean of 6.6%. Investors appear well-positioned in REITs, especially the nonoffice ones, and have largely shunned the developers, especially those with significant China exposure. CMA trades at just 0.6x our NAV estimate of SGD2.31/share, suggesting room for positive surprises to underpin outperformance going into 2012. On the other hand, we estimate CCT trades at an implied EV of just SGD1,451psf for its SG office assets, which appears conservative relative to recent transactions.
Top picks: CMA, CCT; more cautious on CMT Stock Bberg Ticker
CapitaMalls Asia CapitaCommercial Trust CapitaMall Trust CMA SP CCT SP CT SP Share Px 1.36 1.14 1.77 Rating Buy Buy Neutral PT 1.66 1.47 1.70 Upside/ Downside 22.5 28.9 -4.0
Anchor themes Three themes could play out in 2012F: 1) private housing inventory build-up, 2) more sales of partial stakes in office assets, and 3) suburban retail property market could be weaker than expected. Transaction benchmarks are likely to prompt a valuation reassessment for CMA and CCT, in our view. Nomura vs consensus Having CCT as one of our top picks and our relatively cautious stance on CMT are probably non-consensus.
Research analysts Singapore Property Min Chow Sai - NSL minchow.sai@nomura.com +65 6433 6959 Paul Lin Zikai - NSL paul.lin@nomura.com +65 6433 6964
Source: Bloomberg, Nomura estimates; prices as of 15 November 2011
Nomura | Property
November 21, 2011
Transactions to prompt valuation reassessment

We see three potential themes playing out in the physical property market in 2012F: 1) a significant inventory build-up in the private housing market, 2) more sales of partial stakes in commercial properties, and 3) challenge to the perceived defensiveness of the suburban retail property market. Our top picks in the sector are CapitaMalls Asia (CMA) and CapitaCommercial Trust (CCT), while we remain relatively more cautious on CapitaMall Trust (CMT).
Both developers and REITs underperformed in 2011

In 2011 YTD, on a weighted average basis, both the REITs (-16%) and developers (25.4%) under our coverage have underperformed the broader FSSTI index (-13.9%), with the latter by a larger extent. Considering market volatility this year, it is not surprising that the perceived defensiveness of REITs has been preferred over higherbeta developers that continue to be weighed down by concerns over slowing demand, rising inventory and China (for those with significant exposure) risk. The best relative performer among the developers we cover has been UOL (-5.6%), which has a disciplined land-banking strategy and minimal inventory risk. The worst performer has been Keppel Land (KPLD) (-45%), given its exposure to the SG office market as well as the China and Vietnam housing markets. The best performer among the REITs we cover has been AREIT (-5.3%), given its defensive portfolio, while the worst performer has been KREIT (-28.5%), given its exposure to the SG office market as well as its recent purchase of KPLDs stake in Ocean Financial Centre and the related rights issue. Among the two property investors we cover CMA and Global Logistic Properties (GLP), GLP performed relatively better than CMA this year, down 20.8% compared with the latters loss of 30.4%, most likely we think because the supply-demand outlook for Chinas logistic property market is perceived to be more favourable compared with the retail property market.
Fig. 78: Developers underperformed
105 100 95 90 85 80 75 70 65 60 55 85 80 FSSTI Covered Developers
Fig. 79: so did REITs but to a smaller extent

105 100 95 90 FSSTI Covered REITS
Jan-11
Jan-11
Jun-11
May-11
May-11
Mar-11
Mar-11
Feb-11
Apr-11
Jul-11
Oct-11
Aug-11
Aug-11
Sep-11
Oct-11
May-11
May-11
Apr-11
Oct-11
Aug-11
Aug-11
Physical property market: three themes in 2012F

For the physical property market, looking ahead into 2012F, we see three themes that could play out: 1) significant inventory build-up in the private housing market, 2) the sale of partial stakes in commercial properties held by property funds, and 3) the perceived defensiveness of the suburban retail property market being challenged.
Sep-11
Jan-11
Jan-11
Jun-11
Mar-11
Feb-11
Mar-11
Oct-11
44
75
Jul-11
Nomura | Property
November 21, 2011
Private housing: inventory build-up remains a key risk In our report Take-up of primary launches to slow, 15 July, we had forecast a total of 38,203 units of non-landed private homes (excluding executive condominiums [ECs]) could be launched in the primary market in 3Q11-4Q12F, vs. a potential take-up of 16,200 units, suggesting primary market inventory could build up significantly going into 2012. In 3Q11, 23 new projects with a total 4,711 units were launched for sale, with 2,544 units (54%) sold as of end-September 2011 i.e. the pace of new launches was in line with our expectations, though the take-up has been better than expected.
Fig. 80: Potential primary supply of non-landed private homes (ex-ECs)
Forecast was first published in our 15 July report; most of supply in OCR
Potential launches in 3Q11-4Q12 from unsold launched projects as of end-May launch ready as of end-May from aw arded GLS sites from yet to be aw arded GLS sites but on confirmed list from private land Total
CCR 4,715 1,667 340 140 2,841 9,703
RCR 2,815 562 1,601 875 1,400 7,253
OCR 4,210 745 8,190 7,525 577 21,247
Total 11,740 2,974 10,131 8,540 4,818 38,203
Source: URA, Nomura estimates; CCR = Core Central Region, RCR = Rest of Central Region, OCR = Outside Central Region
The build-up in unsold inventory (unsold non-landed units in launched private residential projects) accelerated in 3Q11, up 9.8% q-q to 4,841 units, compared with an increase of 8.4% q-q in 2Q11, and was 43.1% higher than the 3,383 units at the end of 2010. As highlighted in our 15 July report, the rise in unsold inventory has historically been negative for property stocks (correlation = -0.71 with the FSTRE index). Consequently, with unsold inventory expected to increase further, we continue to advocate a selective approach towards the developers.
Fig. 81: Unsold inventory vs. property stocks
Correlation = -0.71
6,000 5,000 4,000 3,000 2,000 1,000
Unsold Inventory (LHS)
FSTRE (RHS)
1,200 1,000 800 600 400 200
Source: URA, Bloomberg, Nomura research
Office properties: more sales of partial stakes to come? Excluding strata-titled units, we estimate there were about SGD4.3bn worth of commercial property transactions so far this year, the latest being the SGD55mn purchase of a 50% stake in Finexis Building by an unidentified offshore fund, valuing the freehold office property along Robinson Road at SGD2,042psf.
45
Nomura | Property
November 21, 2011
In the coming months, we expect more transactions to be announced, considering that on one hand, PE funds (particularly those invested with European-based equity) could be looking to raise cash from the SG office assets owned, while on the other hand, it appears private investors interest in SG office assets remains strong five out of the seven transactions since July were sold to private investors. In particular, we expect sale of partial stakes to make up the bulk of the transactions, considering the appetite of private investors is understandably smaller compared to PE funds the biggest purchase made by private investors this year was that of One Philip Street and Commerce Point at a combined SGD283mn and there was only one other transaction (1Finlayson Green) that crossed the SGD200mn mark this year.
Fig. 82: Commercial property transactions in 2011 year to date
Property Type Tenure Location Buyer Seller NLA (sq ft; 100% basis) GS fund 278,356 CDL CS fund Munich RE, Ergo Private investors Private investor RCL 20,437 92,205 386,525 89,950 77,244 92,500 46,250 885,000 82,191 Price (S$ m n) 626 57 168 889 227 148 175 74 1,840 205 Price (S$ psf) 2,249 2,789 1,822 2,300 2,524 1,916 1,892 1,600 2,376 2,494
16 Collyer Quay (49% stake) The Corporate Building 112 Robinson Road Capital Square 1 Finlayson Green Anson House RCL Centre 182 Clemenceau Ave Ocean Financial Centre (87.5% stake) Commerce Point
Office Office Office Office Office Office Office Office Office Office
999-yr Freehold Freehold 99-yr Freehold 99-yr Freehold 99-yr 99-yr 999-yr
Raffles NTUC fund Place Robinson Oxley-led Road consortium Robinson Grace Road Global Raffles Alpha and Place NTUC funds Raffles Private Place investors Tg Pagar ING fund Tg Pagar
One Philip Street
Office
999-yr
Royal Brothers Building (50% stake) Finexis Building (50% stake)
Office Office
999-yr Freehold
Avivamanaged fund Raffles Royal Group AvivaPlace managed fund Raffles RB Capital Asok Kumar Place Robinson Unidentified Robinson Road offshore Land fund
Dhoby Ghaut Raffles Place Raffles Royal Group Place
Private investor Private Silverpeak investors fund KREIT Keppel Land
38,194
78
2,042
59,000 53,873
90 55
3,051 2,042
Source: Company data, Business Times, Nomura research; exclude strata-titled properties; chronological order with bottom (Finexis Building) being the most recent
Judging from the recent transactions, we do not think capital values have to be discounted significantly for prospective private investors to invest, considering older buildings like Commerce Point, One Philip Street still changed hands at an average price of SGD2,268psf in October. Nonetheless, these investors are likely to be more selective in the near term, with preference likely for prime freehold (or 999-yr leasehold) assets. In this regard, we continue to believe the market has overly discounted the office REITs, which we estimate are currently trading at an implied EV of SGD1,451-1,875psf for their SG office assets. This is especially true in the case of CCT, which is trading at an implied EV of SGD1,451psf for its SG office assets and Six Battery Road (6BR) as well as HSBC Building, both 999-yr leasehold assets, represent 27% of its portfolio. Therefore, we see the potential transaction benchmarks surfacing over the next few months as catalysts for the market reassess the value of these portfolios.
46
Nomura | Property
November 21, 2011
Fig. 83: Office REITs currently trading at SGD1,456-1,870psf implied EV for SG office assets
KREIT's calculation takes into account proposed acquisition of OFC
REITs
Bloom berg ticker
Nom rating
Price S$/shr
Im plied EV for SG office portfolio S$ psf
Key SG office assets
Office CapitaCommercial Trust Suntec REIT KREIT

Source: Bloomberg, Nomura estimates
CCT SP SUN SP KREIT SP
Buy Buy Neutral
1.15 1.19 0.94
1,451 1,460 1,875
CT, 6BR, HSBC Building, OGS, RCT Suntec City office, ORQ, MBFC Ph 1 PT, BJT, ORQ, MBFC Ph 1, OFC
Suburban retail property: perceived defensiveness could be challenged In our 9 November report Perceived defensiveness may be put to the test on CMT, we posited that the markets perception of a defensive suburban retail property market will likely be put to the test in 2012-13F. Suburban retail property stocks are projected to increase by 24% during this period while the narrower-than-usual discount (25.6% in 3Q11, vs. an average 30.4% between 3Q00 and 3Q11) between suburban and prime rents may have already prompted a shift in marginal demand in 3Q11. Suburban rents registered the first sequential decline since 4Q09, down 0.4% q-q to SGD27.60psfpm during 3Q11, and going into 2012F, weaker demand for retail space could amplify the supply situation, especially in the suburban segment. Occupancy of retail properties declined 20bps to 97.9% in 3Q11, despite a marginal decline in overall stock, suggesting weak take-up during the quarter.
Fig. 84: Overall retail property stock +13.8% by end-2013F
Suburban stock to increase 24.2% over same period
Fig. 85: Suburban to prime discount rebounded off 2Q11 low

Shift in marginal rental demand from suburban to prime in 3Q11?
25,000,000
Primary
Secondary
Suburban
35 32 29 26 23 20
Suburban vs prime discount %
20,000,000
15,000,000
10,000,000
5,000,000
0 Existing stock (sq ft)

Source: URA, JLL, Nomura estimates
Stock by end-2013F (sq ft)
Source: JLL, Nomura research
Top picks = CMA, CCT; more cautious on CMT

While the physical property outlook, especially for the private housing and office markets, looks cautious heading into 2012, it appears the current valuation of stocks, especially of developers, has already priced in the outlook to some extent developers are trading at an average FY12F P/B of 0.9x, compared with the historical average of 1.3x, while REITs are trading at an average FY12F yield of 6.7%, compared with the historical average of 6.6%. Investors appear to be relatively well-positioned in REITs, especially the non-office ones, on account of the perceived defensiveness, and have largely shunned the developers, especially those with significant China exposure. There is therefore a higher potential for developers to outperform in 2012, in our view, should incremental news flow, especially those from China, be less negative than what the market is expecting.
3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11
47
Nomura | Property
November 21, 2011
Taking into account all the factors considered above, our top picks for 2012, among the property stocks under our coverage, are CMA and CCT, while we remain relatively more cautious on CMT.
Fig. 86: Developers P/B (x)
Historical mean = 1.3x
Fig. 87: REITs yield (%)

Historical mean = 6.6%
PBV (x) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Weighted Avg P/B (Developers)
Yield (%) 16 14 12
+1 SD
Covered REITS yield
10 8 Mean: 6.6% 6 4
+1 SD
Mean: 1.27x
-1 SD
Oct-01 Mar-02 Aug-02 Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11
-1 SD
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
CapitaMalls Asia (CMA SP, Buy, TP SGD1.66) Recent transactions in China continue to suggest that the book value of its retail assets in China is conservative, notwithstanding a more cautious market outlook. As developers put more capital to work in China in 2012F, we believe there will be more transaction benchmarks to prompt the market to reassess the 10% discount currently ascribed to CMAs book value. Besides transaction benchmarks, the other catalyst to re-rate the stock would be the turnaround of CMAs associate malls in China. In this respect, the strategic move of raising its equity stakes in Hongkou Plaza and Minhang Plaza in Shanghai, which were completed this year (when most of the pre-operating expenses will be booked), is instrumental (the higher contribution will be booked in 2012F as the acquisition of the additional stakes will be completed by end of this year), in our view, and remains underappreciated by the market. Trading at 0.6x our NAV estimate of SGD2.31/share, we believe market expectations on the stock remain low, providing ample room for positive surprises in 2012F to underpin an outperformance, in our view. CapitaCommercial Trust (CCT SP, Buy, TP SGD1.47) Similar to CMA, recent transactions suggest the current implied EV of SGD1,451psf for its SG office portfolio that CCT is trading at is overly conservative and we look to more transaction benchmarks over the next few months to prompt a reassessment of CCTs valuation by the market. Trading at 0.7x book, vs. the REITs sector average of 0.9x book, we believe current low market expectations provide the condition for positive surprises in 2012, should CCTs portfolio vacancy hold up better than expected. Committed occupancy at 6BR and One George Street (OGS) ended 3QFY11 at 91% and 96.6%, respectively, which was better than market expectations and provided the catalyst for the stocks outperformance following the results. Moreover, with a gearing of just 0.28x, CCTs leverage remains one of the lowest among the REITs that we cover, suggesting minimal recapitalisation risk. CapitaMall Trust (CT SP, Neutral, TP SGD1.70) While core portfolio has shown resilience during the last financial crisis, the manager still needs to find tenants for uncommitted space at its upcoming malls JCube, Illuma, Atrium and Jurong Gateway over the next two years when competition could be keen with other new supply amidst potentially weaker demand. We believe this, coupled with
Jul-11
48
Nomura | Property
November 21, 2011
relatively high gearing of 0.4x, will lead the market to reassess the premium valuation currently ascribed to the stock (FY12F yield of 5.6%, P/B 1.1x).
Fig. 88: Physical market outlook summary
YTD chg % Private hom e prices mass market prime luxury Rents prime Grade A office prime retail suburban retail industrial
Source: URA, JLL, Nomura estimates
Latest S$ psf 1,098 2,500 S$ psfpm 10.20 37.90 28.20 1.75
Chg % 2012F -13.5 -6.0
2013F -5.3 -4.3
4.5 0.0
9.1 -0.5 2.2 25.0
5.0 2.5 2.5 2.5
5.0 2.5 2.5 2.5
Fig. 89: Valuation summary developers

Rating Price S$/shr Mkt Cap (US$m) NAV S$/shr P/NAV (x) PT S$/shr P/PT (x) FY12F FY12F FY12F FY12F Net debt/equ ity (%) 19.3 31.4 39.9 34.9 32.9 31.4
P/E (x) P/BV (x) Yield (%)
Keppel Land Capitaland UOL Group Wing Tai Holdings City Developments Total/Wtd avg
Buy Buy Buy Neutral Neutral
2.69 2.70 4.54 1.22 10.56
3,102 8,870 2,699 747 7,433 22,851
6.07 4.48 7.17 2.27 12.48
0.4 0.6 0.6 0.5 0.8 0.7
4.90 4.05 5.59 1.60 10.92
0.5 0.7 0.8 0.8 1.0 0.8
11.0 17.6 11.5 6.8 13.9 14.4
0.8 0.8 0.6 0.5 1.2 0.9
3.3 2.2 2.2 4.1 0.8 2.0
Source: Bloomberg, Nomura estimates; prices as of 15 November 2011; valuation of WINGT under review
Fig. 90: Valuation summary REITs, property investors

SG REITS Rating Price Mkt Cap (S$/ut) (US$ mn) 2.05 1.14 1.59 1.77 0.92 0.59 1.18 3,306 2,500 1,182 4,560 1,796 880 2,032 16,255 Rating Price Mkt Cap (S$/ut) (US$ mn) 1.36 1.85 4,075 6,581 10,656 NAV P/NAV (x) PT (S$/ut) (S$/ut) 1.89 1.60 1.80 1.78 1.52 0.71 1.79 1.1 0.7 0.9 1.0 0.6 0.8 0.7 0.9 NAV P/NAV (x) PT (S$/ut) (S$/ut) 2.31 2.57 0.6 0.7 0.7 1.66 2.57 2.10 1.47 1.88 1.70 1.23 0.68 1.64 P/PT (x) FY12F P/B (x) 1.0 0.8 0.8 1.0 0.7 0.9 0.7 0.9 1.2 0.8 1.0 1.1 0.6 0.6 0.7 0.9 FY12F FY12F yield (%) debt/asset (x) 6.68 0.32 6.50 0.28 7.20 0.28 5.53 0.41 7.12 0.39 7.27 0.31 8.03 0.40 6.6 0.35
AREIT SP CCT SP CDREIT SP CT SP KREIT SP SGREIT SP SUN SP Total/wtd avg SG Landlords
Neutral Buy Neutral Neutral Neutral Neutral Buy
P/PT (x) FY12F P/B (x) 0.8 0.7 0.8 0.9 1.3 1.1
CMA SP GLP SP Total/wtd avg
BUY BUY
FY12F FY12F yield (%) debt/asset (x) 2.21 0.20 0.71 0.02 1.3 0.09
Source: Bloomberg, Nomura estimates; prices as of 15 November 2011; valuation of CDREIT, KREIT under review
49
Telecoms
TELECOMS
EQUITY RESEARCH
Another stable year for Singapore telcos
November 21, 2011
Not much excitement, not many concerns

Another year of stability ahead; modest changes in market shares For 2012, while we see few operational or financial risks for Singapore telcos, we do not see many sector re-rating catalysts either. In our view, the sectors defensive appeal is intact with 6-7% dividend yields, and macro sentiment will likely remain a key driver. Operationally, NBN take-up rates should pick up, which could see modest shifts in market share; smartphones are unlikely to drive earnings unless data is re-priced; and content regulations will likely still be a work-in-progress but with pay-TVs scale shifting more in SingTel's favour. Overall, we expect average revenue, EBITDA and NPAT growth of 2-6% across the sector. Our stock preference: M1 > SingTel > StarHub Our thesis is unchanged for M1, which we see as a beneficiary of NBN and content changes with low investment (capex) hurdles. SingTel's Singapore business will likely surpass expectations again in 2012, but its regional associates and Optus will likely be a drag. StarHub's 7.5% yield is hard to argue against, although operational catalysts look limited. Theme 1: Wireless trends will earnings improve? Singapore leads on smartphones, which account for 80-90% of new sales and >60% of the total base. High-end devices (e.g., iPhones) are prominent, which drives sub adds, but are subsidised and offer a generous 12GB download. Hence, ARPU uplift has been minimal and EBITDA growth negligible. This could remain a feature unless data is re-priced. Theme 2: NBN rollout will it gain traction? NBN take-up rates have lagged expectations, with companies attributing this to network provisioning issues. We also think it is due to a lack of product appeal, installation and pricing issues. This should change in 2012, and we may see a regulatory push to drive take-up rates. Connections reached ~70k in September and we expect ~220k in December 2012. We still see M1 as a beneficiary of the NBN rollout and expect a 6-8% revenue contribution by next year. Theme 3: Content development and pay-TV market share The impact of content crosscarriage and NIMS should be more visible next year. Both these measures aim to level the playing field for operators and offer consumers more choices; they also bring inherent risk of an ARPU squeeze. In any case, we think SingTel will maintain its intensity to continue to win pay-TV share, which increased 500bps y-y to 38% at endSeptember, although its ARPU remains 50% below StarHub's.
Company M1 SingTel StarHub Prices as on Nov 14 Code M1 SP ST SP STH SP Rating Buy Neutral Neutral Price (SGD) 2.5 3.2 2.9 PT (SGD) 3.3 3.4 2.6 Upside/Downside 33% 5% -12%
Anchor themes Fibre rollout and content crosscarriage are opening up the competitive landscape. Nomura vs consensus We are 21% above consensus TP for M1, 9% below for StarHub and broadly in line for SingTel.
Research analysts ASEAN Telecoms Sachin Gupta, CFA - NSL sachin.gupta@nomura.com +65 6433 6968 Neeraja Natarajan - NSL neeraja.natarajan@nomura.com +65 6433 6961 Pankaj Suri - NSFSPL pankaj.suri@nomura.com +91 22 4053 3724 Gopakumar Pullaikodi - NSFSPL gopakumar.pullaikodi@nomura.com +91 22 4053 3733
Nomura | Telecoms
November 21, 2011
Fig. 91: Singapore telco share price performance

15% 10% 5% 0% -5% -10% -15% -20% 3-Jan 10-Jan 17-Jan 24-Jan 31-Jan 7-Feb 14-Feb 21-Feb 28-Feb 7-Mar 14-Mar 21-Mar 28-Mar 4-Apr 11-Apr 18-Apr 25-Apr 2-May 9-May 16-May 23-May 30-May 6-Jun 13-Jun 20-Jun 27-Jun 4-Jul 11-Jul 18-Jul 25-Jul 1-Aug 8-Aug 15-Aug 22-Aug 29-Aug 5-Sep 12-Sep 19-Sep 26-Sep 3-Oct 10-Oct 17-Oct 24-Oct 31-Oct 7-Nov 14-Nov -25% StarHub Singtel M1 FSSTI Index
Source: Company reports, Nomura research
Fig. 92: Total revenue growth 12 months ended Sep

9% 8% 7% 6% 5% 4% 3% 2% 1% 0% M1 SingTel StarHub Total revenues 3% 1% 3% 8%
Fig. 93: Wireless revenue growth 12 months ended Sep

12% 10% 8% 6% 4% 4% 2% 2% 0% SingTel StarHub M1 Total wireless revenues 10%
7%
Fig. 94: Total EBITDA growth 12 months ended Sep

14% 12% 10% 8% 6% 4% 2% 0% -2% -4% StarHub M1 SingTel Total EBITDA 0% -1% 1% 13%
Fig. 95: EBITDA margin change 12 months ended Sep

400 304 300 200 100 0 (100) (200) (300) StarHub SingTel (142) (265) M1 (49)
Total EBITDA
51
Nomura | Telecoms
November 21, 2011
Fig. 96: Incremental revenue trends

Incremental shares - 12-months to September Sep-10 Total revenues StarHub M1 SingTel Total revenues 2,229 934 6,273 9,436 2,258 1,009 6,432 9,699 30 75 159 264 11% 28% 60% Sep-11 Change % incremental
Fig. 97: Incremental EBITDA trends

Incremental shares - 12-months to September Sep-10 Total EBITDA StarHub M1 SingTel Total EBITDA Total margins 584 315 2,271 3,170 661 314 2,237 3,211 76 (1) (34) 41 Sep-11 Change
Wireless revenues StarHub M1 SingTel Total wireless revenues 1,159 575 1,705 3,439 1,208 588 1,869 3,665 49 13 164 226 22% 6% 73%
StarHub M1 SingTel Total EBITDA
26% 34% 36% 34%
29% 31% 35% 33%
304 bps -265 bps -142 bps -49 bps
Fig. 98: Singapore telcos revenue trends

Mar '09 SGD mn Total Singapore revenues StarHub M1 SingTel TOTAL Total revenue y-y change % StarHub M1 SingTel TOTAL Total revenue market share StarHub M1 SingTel Mobile service revenue StarHub M1 SingTel TOTAL Mobile revenue y-y change % StarHub M1 SingTel TOTAL Mobile revenue q-q change % StarHub M1 SingTel Mobile revenue market share StarHub M1 SingTel
Jun '09 Sep '09 Dec '09 Mar '10
Jun '10 Sep '10 Dec '10 Mar '11
Jun '11 Sep '11
531 187 1,453 2,170
533 190 1,384 2,107
537 188 1,446 2,172
550 216 1,534 2,300
557 249 1,646 2,452
569 223 1,507 2,299
552 246 1,586 2,384
559 261 1,614 2,434
559 258 1,661 2,477
569 245 1,556 2,370
572 245 1,601 2,418
-1% -9% 13% 7%
0% -7% 10% 6%
2% -4% 9% 6%
2% 11% 2% 3%
5% 34% 13% 13%
7% 17% 9% 9%
3% 30% 10% 10%
2% 21% 5% 6%
0% 3% 1% 1%
0% 10% 3% 3%
4% 0% 1% 1%
24.5% 8.6% 67.0%
25.3% 9.0% 65.7%
24.7% 8.7% 66.6%
23.9% 9.4% 66.7%
22.7% 10.2% 67.1%
24.8% 9.7% 65.5%
23.2% 10.3% 66.5%
23.0% 10.7% 66.3%
22.5% 10.4% 67.1%
24.0% 10.4% 65.7%
23.7% 10.1% 66.2%
265 140 370 775
272 142 380 793
277 141 394 812
281 143 419 843
286 143 417 847
294 145 432 871
298 144 437 879
303 147 465 915
296 145 455 896
303 148 472 922
307 148 477 932
-3% -8% 9% 1%
1% -8% 10% 3%
5% -6% 11% 5%
3% -2% 12% 7%
8% 2% 13% 9%
8% 2% 14% 10%
8% 2% 11% 8%
8% 3% 11% 9%
3% 1% 9% 6%
3% 2% 9% 6%
3% 3% 9% 6%
-3% -4% -1%
3% 1% 3%
2% 0% 4%
1% 2% 6%
2% 0% 0%
3% 1% 4%
1% -1% 1%
1% 2% 6%
-2% -1% -2%
2% 2% 4%
2% 0% 1%
34.2% 18.1% 47.7%
34.3% 17.8% 47.9%
34.1% 17.3% 48.5%
33.3% 17.0% 49.7%
33.8% 16.9% 49.3%
33.8% 16.6% 49.6%
33.9% 16.4% 49.7%
33.1% 16.1% 50.8%
33.0% 16.2% 50.8%
32.8% 16.0% 51.2%
33.0% 15.8% 51.2%
52
Nomura | Telecoms
November 21, 2011
Fig. 99: Singapore telcos EBITDA trends

Mar '09 SGD mn EBITDA StarHub M1 SingTel TOTAL EBITDA share StarHub M1 SingTel - Singapore EBITDA margins StarHub M1 SingTel - Singapore
Jun '09 Sep '09 Dec '09 Mar '10
Jun '10 Sep '10 Dec '10 Mar '11
Jun '11 Sep '11
168 77 579 824
161 78 580 820
172 75 558 806
152 79 583 814
119 77 585 781
141 80 578 799
172 79 525 777
170 77 567 814
160 78 550 788
164 79 567 810
167 79 553 800
20% 9% 70%
20% 10% 71%
21% 9% 69%
19% 10% 72%
15% 10% 75%
18% 10% 72%
22% 10% 68%
21% 10% 70%
20% 10% 70%
20% 10% 70%
21% 10% 69%
33% 45% 40%
31% 45% 42%
33% 43% 39%
29% 44% 38%
22% 42% 36%
26% 44% 38%
32% 44% 33%
32% 41% 35%
30% 42% 33%
30% 42% 36%
31% 42% 35%
Fig. 100: Wireless subscriber trends for 12-month period

Incremental shares - 12-months to September Sep-10 Wireless customers StarHub M1 SingTel Total subs 2,121 1,892 3,167 7,180 2,170 2,009 3,488 7,667 49 117 321 487 10% 24% 66% Sep-11 Change % incremental
Fig. 101: ARPU change trend during 12-month period

Sep-10 Blended average ARPUs StarHub M1 SingTel 46 39 52 Sep-11 46 40 54 73 64 88 20 14 14 Change -1% 2% 3% 2% 2% 0% -10% -5% 2%
Blended average post-paid ARPUs StarHub 71 M1 63 SingTel 88 Blended average pre-paid ARPUs StarHub M1 SingTel 22 15 14
53
Nomura | Telecoms
November 21, 2011
Fig. 102: Singapore telcos wireless trends

Wireless trends Subscriber (k) StarHub M1 SingTel Subscriber market share % StarHub M1 SingTel Net - adds (k) StarHub M1 SingTel Blended ARPU StarHub M1 SingTel Post-paid ARPU StarHub M1 SingTel Pre-paid ARPU StarHub M1 SingTel
Mar '09 1,815 1,619 2,976
Jun '09 Sep '09 Dec '09 Mar '10 1,849 1,669 2,991 1,884 1,717 3,100 1,918 1,758 3,181 1,975 1,796 3,116
Jun '10 Sep '10 Dec '10 Mar '11 2,056 1,849 3,113 2,121 1,892 3,167 2,145 1,911 3,229 2,145 1,934 3,307
Jun '11 2,153 1,968 3,417
Jun '12 2,170 2,009 3,488
28% 25% 46%
28% 26% 46%
28% 26% 46%
28% 26% 46%
29% 26% 45%
29% 26% 44%
30% 26% 44%
29% 26% 44%
29% 26% 45%
29% 26% 45%
28% 26% 45%
49 (12) 34
34 50 15
35 48 109
34 41 81
57 38 (65)
81 53 (3)
65 43 54
24 19 62
23 78
8 34 110
17 41 71
46 40 50
46 39 50
46 38 50
47 39 51
46 39 51
45 40 53
46 40 53
46 41 56
45 40 53
46 40 53
46 39 52
67 60 83
69 61 84
69 60 85
72 61 89
71 62 86
70 63 89
72 64 88
73 65 92
72 64 87
73 64 87
74 63 85
24 16 15
23 16 14
23 15 14
23 14 14
23 15 14
21 15 14
21 14 14
20 14 14
20 14 15
20 13 14
19 14 14
Fig. 103: Singapore telcos pay-TV trends

PayTV Trends Pay TV Subs ('000) SingTel StarHub PayTV market share SingTel StarHub Pay-TV ARPU SingTel StarHub Pay-TV revenues SingTel StarHub
Mar '09 78 527
Jun '09 Sep '09 Dec '09 Mar '10 101 530 126 535 155 539 191 541
Jun '10 Sep '10 Dec '10 Mar '11 220 541 245 537 264 538 291 542
Jun '11 Sep '11 313 544 335 542
13% 87%
16% 84%
19% 81%
22% 78%
26% 74%
29% 71%
31% 69%
33% 67%
35% 65%
37% 63%
38% 62%
58
11 56
12 56
9 56
12 55
23 56
32 50
28 48
28 49
25 49
26 50
102
3 101
4 100
4 103
6 102
14 110
22 92
21 92
23 92
23 92
25 93
54
Air transport
TRANSPORT/LOGISTICS
EQUITY RESEARCH
Defensive among deep cyclicals
November 21, 2011
Scoot could be a major earnings swing factor

Earnings decline expected in FY12F On the back of higher oil prices and weaker air cargo demand, we believe 2012F earnings for SIA (the main airline operator in Singapore) are likely to decline, despite relatively firm overall passenger demand and improved passenger mix. Theme 1: Cash-pile provides downside protection As the most cash-rich airline in the region, SIA is likely to continue surprising the market on its dividends. Recall that in its FY11 results SIA surprised the market on the upside by declaring a special DPS of SGD0.80/shr for a full-year payout ratio of 153% and hence the FY11 dividend yield was 9.5%. Given that SIA still has high level of cash (net cash of SGD3941mn as on 30 September 2011), there is still a possibility that SIA could continue surprising on dividend payout and/or share buyback in the market. Theme 2: Scoot should be a swing factor The success, or lack thereof, of SIAs new long-haul low cost carrier (named Scoot) should be a swing factor for earnings and valuations when it starts commercial operation with 4B777 by mid-2012. While Scoot is expected to have significantly lower unit costs than incumbents as its planes are to be configured to have 25% more seats and to have 20% higher asset utilisation (fly 20% more hours in a day), SIA would still not be able to provide a target timing for the break-even of Scoot, in our view. Theme 3: Valuations are increasingly attractive We believe SIAs valuation is not significantly high on an estimated P/B of 1.0x for FY12F, which is at its historical mid-cycle average of 1.0x and below the current level of many of its peers. Anchor themes While earnings are expected to decline in FY12, we believe this is largely discounted in share prices. Given a significant net cash position, SIA (the major player in Singapore aviation) is arguably the most defensive among deep cyclicals.
Research analysts Asia Transport/Logistics Jim Wong - NIHK jim.wong@nomura.com +852 2252 2195 Jacinda Loh - NSM jacinda.loh@nomura.com +60 3 2027 6889
Nomura | Air transport
November 21, 2011
Defensive among deep cyclicals

As an aviation hub, Singapore's national carrier Singapore Airlines (SIA SP; Buy) faces more competitive pressure than some of its peers, given the more open air regulations in Singapore vis--vis other Asian locations. We note that SIA commands an air passenger market share of 33% in its home base of Singapore, whereas close comparable Cathay Pacific (293 HK; Buy) commands a 49% market share in its home base of Hong Kong. While SilkAir is 100% held by SIA and 33% in Tiger Air by SIA, both are low-cost carriers (albeit SilkAir is generally branded more as a regional carrier than a LCC) which have significantly different yield profiles than SIA whereas Dragonair and CX have much more similar branding and yields. Further, we note that while LLCs have a market share of over 27% in Singapore, LCCs have a market share of less than 5% in Hong Kong. Probably, this has led SIA to launch yet another LCC in the form of Scoot, a 100%-held long-haul LCC, in our view.
Fig. 104: Comparative market share of incumbent airlines
Market share in Singapore hub Singapore Airlines Tiger Airways SilkAir Jetstar Asia Qantas Airways AirAsia Cathay Pacific Airways Indonesia AirAsia Emirates Airlines Lion Air Garuda Indonesia Thai Airways Intl Malaysia Airlines China Eastern Airlines Cebu Pacific Air Thai AirAsia Lufthansa German Airlines China Airlines Valuair Air China Others
Source: OAG
Market share in Hong Kong hub 48.70% 5.09% 3.51% 2.97% 2.45% 1.90% 2.21% 2.26% 1.95% 1.55% 1.54% 1.38% 1.20% 1.15% 1.06% 0.94% 0.92% 0.86% 0.87% 0.81% 16.66% 7.45% China Airlines 6.10% Hong Kong Airlines 4.35% China Eastern Airlines 4.33% Singapore Airlines 3.57% Hong Kong Express Airways 3.80% Thai Airways Intl 2.55% EVA Airways 2.05% Air China 1.86% Qantas Airways 1.59% United Airlines 1.52% Philippine Airlines 1.49% China Southern Airlines 1.28% All Nippon Airways 1.31% Cebu Pacific Air 1.25% Emirates Airlines 1.15% AirAsia 1.09% Korean Air 1.00% Chu Kong Passenger Transp 1.00% Mandarin Airlines
32.72% Cathay & Dragonair
18.54% Others
Although such relatively larger competitive pressure has resulted in SIA recording less strong results than some of its North Asian peers in both operating and financial performances, the main factor that is now affecting airlines earnings across Asia is oil price, a factor not differentiated by hubs. Given that our oil sector team believes oil prices to have already peaked in 2Q11, forward prospects for SIA (along with other airlines) should look more promising. Further, as the most cash-rich airline in the region, SIA could continue to surprise the market on its dividends. Recall that in its FY11 results SIA surprised the market on the upside by declaring a special DPS of SGD0.80/shr for a full-year payout ratio of 153% and hence a FY11 dividend yield of 9.5%. Given that SIA still has a high level of cash (net cash of SGD3941mn as on 30Sep11), there is still a possibility that SIA would continue surprising on dividend payout. On a valuation basis, we believe SIA is also attractive given that it is trading at book value and at a P/B discount compared to many other Asian airlines.
56
November 21, 2011
Fig. 105: A comparison of regional airlines' revenue-passenger-kilometre (RPK) growth rate (y-y chg %)
CA Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 8.6 16.6 20.8 16.5 25.9 27.1 24.0 18.5 21.1 14.3 8.5 9.9 11.7 5.7 5.6 12.7 10.0 9.4 6.7 6.6 9.2 6.0 CSA 10.8 21.5 25.8 20.4 23.2 28.8 24.0 21.5 25.3 17.9 7.0 12.6 16.6 4.4 4.2 10.6 13.1 8.7 10.8 6.0 8.0 9.0 CEA 36.4 53.9 45.6 36.1 50.0 69.5 63.4 54.0 62.6 54.7 47.5 59.4 27.0 12.0 9.9 16.6 13.8 2.8 5.3 2.0 3.0 Cathay 1.6 10.5 6.6 (4.3) 10.3 19.6 14.0 7.6 15.2 13.8 9.0 3.0 6.8 0.1 (1.6) 6.8 5.1 4.5 5.4 6.8 7.0 6.2 SIA (1.6) 9.9 13.9 2.9 12.3 11.4 3.6 0.1 0.6 (0.6) 1.1 0.4 2.9 (1.0) (3.6) 7.0 4.3 (0.4) 4.5 3.0 4.7 0.7 Qantas (0.2) 3.9 4.1 0.9 2.9 0.6 6.9 6.8 6.9 5.4 3.3 6.7 8.5 5.1 3.3 10.0 8.6 0.4 4.8 5.0 4.0 CAL 5.3 19.2 8.4 (4.7) 2.3 17.5 11.7 (0.5) 2.4 3.5 0.7 (4.7) (1.1) (6.8) (7.9) (0.1) 1.4 2.0 0.3 2.1 0.2 0.2 EVA 11.0 14.4 16.0 5.2 19.9 22.7 5.0 (5.6) (0.3) (7.0) (12.4) (12.1) (6.3) (8.2) (11.4) (7.4) (6.0) 2.9 6.9 8.8 7.8 12.6 Thai 21.3 18.8 13.1 (1.6) (5.6) 8.0 12.1 0.9 2.0 1.6 1.2 (0.6) (3.1) (3.0) (4.4) 8.0 13.9 8.0 7.4 4.7 0.4 MAS 25.1 35.7 28.0 17.7 20.5 15.9 6.1 2.4 12.9 10.7 11.7 (3.5) 13.0 9.9 15.3 15.2 11.8 8.3 8.5 0.1 (0.6) KAL 10.8 11.6 19.7 10.5 16.5 13.7 6.1 4.0 9.3 15.4 8.1 (3.1) 5.6 4.4 (0.9) 4.0 8.0 7.0 11.7 11.0 7.4
Source: Company data, Nomura
Fig. 106: A comparison of regional airlines passenger load factor trend (%)
CA Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 77.0 79.0 80.5 80.2 78.2 80.4 83.1 84.0 82.1 83.3 76.8 77.7 78.6 79.4 80.2 82.9 81.8 83.2 86.6 86.1 82.8 82.4 CSA 75.9 78.0 80.3 78.5 75.0 79.2 81.5 82.8 79.9 82.2 76.5 79.4 78.8 80.3 80.6 82.8 80.0 80.8 85.0 83.7 81.0 81.5 CEA 71.8 75.6 77.3 75.5 74.7 80.1 83.2 83.6 79.0 80.9 75.7 76.8 75.9 77.4 77.6 80.1 78.3 78.6 83.0 82.7 79.1 Cathay 83.8 84.1 85.7 83.9 81.3 85.4 87.5 84.4 81.8 83.2 80.5 80.1 81.3 77.3 76.9 80.3 78.3 81.5 86.1 84.2 79.7 80.2 SIA 79.1 79.9 80.8 77.6 74.8 82.8 82.4 78.1 80.3 79.6 78.9 80.7 78.1 75.1 73.2 74.6 73.6 78.8 81.6 76.6 79.6 76.7 Qantas 81.2 79.4 79.5 78.6 75.0 81.0 82.5 79.6 82.6 82.5 81.1 81.9 80.9 77.9 76.5 78.7 76.7 80.3 82.3 78.5 81.9 CAL 80.4 79.9 81.6 80.3 80.1 83.3 84.6 84.1 80.8 81.7 78.7 75.9 79.3 76.6 78.0 79.3 78.8 82.5 84.2 82.1 74.5 75.0 EVA 83.0 79.3 83.7 81.0 79.3 84.5 83.4 82.7 74.8 75.8 74.1 73.9 76.1 74.6 75.7 79.0 80.7 82.5 81.4 82.6 77.0 75.8 Thai 82.0 82.3 78.8 72.1 56.7 65.3 76.3 74.6 73.1 74.3 71.8 75.3 77.8 77.6 72.9 71.8 61.9 65.7 77.2 74.8 69.9 MAS 74.7 74.5 75.3 75.3 70.5 76.4 78.8 76.8 80.3 77.1 75.2 79.5 76.5 74.3 76.9 77.4 73.1 76.0 78.3 71.9 77.5 KAL 80.9 77.3 76.1 75.0 76.0 78.6 80.0 79.2 76.4 79.6 74.1 71.8 81.1 77.0 74.9 76.3 79.3 79.2 81.7 81.4 74.5
Source: Company data, Nomura
57
November 21, 2011
Fig. 107: A comparison of 2011F P/BV of regional airlines

Airlines Singapore Airlines Air China Cathay Pacific China Southern Airlines China Eastern Airlines Korean Air Malaysia Airlines Eva Airways Share price (lcc) 11.07 6.60 13.58 4.29 3.11 45,150 1.41 20.70 2011P/BV(x) 1.0* 1.4 1.0 1.0 1.4 0.8 1.2 1.4
Source: Nomura estimates; *FY12 number used given the March year-end, share price as of 15 Nov 2011
58
Land transport
TRANSPORT/LOGISTICS
EQUITY RESEARCH
Strong ridership trend sustains steady cashflow
November 21, 2011
Riding on growth in public transport

Action: Reiterate Buy on ComfortDelgro on strong contributions from its overseas bus and Singapore taxi segments; SMRT remains Neutral as high electricity/energy costs continue to impact margins We believe the steady uptrend in public transport ridership in Singapore should remain positive for both ComfortDelgro (CD) and SMRT. However, inflationary pressures from higher wage and electricity costs are likely to continue to weigh on earnings, with formulaic fare increases unlikely to fully cover higher costs. While both operators have carved out their niche markets (CD leads in taxi and bus, SMRT in rail), we expect the governments push to double the rail infrastructure network by 2020 will structurally alter transport patterns. We believe CDs recent securing of the Downtown Line (DTL) (in Sep 2011) will be positive for the companys earnings in the medium to longer term. ComfortDelgro: strong results led by overseas and Singapore taxi CDs 3Q11 net earnings of SGD69mn (+12.5% y-y) were ahead of our and market estimates with its Singapore taxi (+6.4% y-y), rail (+22% y-y) and Australia bus (+35% y-y) businesses leading EBIT growth. In our view, the improved performance is a positive indication that the sharp rise in fuel costs appears to have stabilised. The groups robust balance sheet and strong cash-generative aspects of its multinational bus, taxi and other land transport-related businesses should continue to sustain profitability. The group maintains its dividend policy of a 50% payout per annum. SMRT: Circle Line losses still a drag, older lines upgrade and expansion another cost to bear SMRT posted a 25.6% y-y decline in 2Q12 net profits to SGD34.1mn, below our estimate of SGD38mn, on persistently high energy costs and despite higher rail and bus ridership. Rail EBIT fell 25% y-y to SGD23mn, and the bus divisions EBIT loss of SGD2.6mn was higher than our estimate of SGD2.3mn, while taxi barely broke even at SGD0.1mn. Higher costs crimped group 2Q12 EBIT margins to 15.8%, the lowest in the past five years. This margin pressure is partly due to the ramp up at the Circle Line, where the final stages were recently launched. Recommendation and Valuation ComfortDelgro remains our top pick in the Singapore land transport segment as bolt-on acquisitions at its Australia, China and UK bus and taxi operations start to bear fruit, while its Singapore taxi operations see strong demand. At SGD1.42, CD trades at FY11/12/13F P/E valuations of 13x/12x/11x, on the lower end of its historical P/E band of 10-20x, while dividend yields at 4.1% remain attractive. Our price target is unchanged at SGD1.72. Given SMRTs FY12/13F P/E valuations of 16x and 14x (historical P/E band of 8-24x) are not inexpensive, we maintain our Neutral rating, with a DCF-based price target at SGD2.05. Anchor themes Singapore's long-term goal of having at least 70% (from 63% currently) of its population relying on public transport by 2020 means the two incumbent government-linked operators stand to benefit from higher ridership, particularly in the bus and rail segments Nomura vs consensus Our FY11F earnings and price target are broadly in line with consensus estimates.
Research analysts Singapore Transport/Logistics Lisa Lee - NSL lisa.lee@nomura.com +65 6433 6979
Nomura | Land transport
November 21, 2011
Fig. 108: Singapores Mass Rapid Transit Network existing and new lines
Cost of development SGDbn
EXISTING & NEW MRT LINES EXISTING MRT LINES East West Line (19 km) North South Line (38km) North East Line NEW DEVELOPMENTS Circle Line Stage 1 - construction started in Mar02 @ Chinatown, Cross Street, Landmark Bayfront, Promenade, Bugis. Stage 2 - construction started in Aug02 Stage 3 - construction started in 3Q03 Stage 4 and 5 Downtown Line Stage 1 - construction started in Feb08 Stage 2 Stage 3 Thomson Line Eastern Region Line LINE EXTENSIONS Boon Lay MRT extension Tuas extension North South Line extension
Current Operator
Completion
Route length (km)
No of stations
SMRT SMRT SBST/CD
1987 1990 2002
19 38 20
29 Total: SGD5bn 27 17 4.6
SMRT
Apr-10
5.4
6.8 1.4
SMRT SMRT SMRT SBST/CD Tender just awarded
Apr-10 mid-2009 4Q2011
5.6 5.7 17
5 5 13
1.6 1.3 2.5
2013 2015 2017 2018 2020
4.3 16.6 19.1 27 21
6 12 15 18 12
0.5 3.0 tba tba tba
tba tba
SMRT SMRT SMRT
2009 2015 2015
3.8 14 1
2 tba tba
0.45 tba tba
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Nomura | Land transport
November 21, 2011
Fig. 109: Rail ridership on the rise

('000/day) 2,500 2,000 1,500 1,000 500 0 Rail daily ridership (MRT & LRT) (LHS) Rail ridership/population (RHS) (%) 45 40 35 30 25 20 15
Fig. 110: Bus ridership as percentage of population recovers

('000/day) 3,300 3,200 3,100 3,000 2,900 2,800 2,700 2,600 2,500 60 55 75 70 65 Bus daily ridership (LHS) Bus ridership/population (RHS) (%) 85 80
2010E
Source: Company data, Nomura estimate
Source: Company data, Nomura estimate
Fig. 111: Projected average daily rail ridership on new MRT lines
(mn/day) 6 NorthSouth/EastWest Lines (LHS) Circle Line (LHS) North East Line (LHS) Downtown Line (LHS) Eastern Region Line (LHS) % growth (RHS) (%) 30
Fig. 112: CD to achieve steady earnings despite higher costs
(SGDmn) 500 450
Sales (RHS)
EBIT (LHS)
(SGDmn) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0
20
400 350 300
10
250 200
2010
2012
2014
2016
2018
2004A
2006A
2008A
2020
150
FY11F
FY12F
Fig. 113: Valuations Land Transport

Price ($) 15-Nov-11 Rating ComfortDelgro Corp 1.42 BUY SMRT 1.84 NEUTRAL
Note: pricing as of 15 Nov 2011 Source: Bloomberg, Nomura estimates
Price Target ($) 1.72 2.05
PER (x) FY11F 12.9 16.1
PBV (x) FY11F 1.5 3.3
Yield (%) FY11F Nomura Comments 4.1 Strong Australia bus and S'pore taxi lead 3Q11 4.4 Singapore rail impacted by high electricity and staff costs
FY13F
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
2010E
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Shipping
SHIPPING
EQUITY RESEARCH
Fog thickens
November 21, 2011
Still no light at the end of the tunnel

Container shipping macro fog thickens We believe that 2012 is likely to be another difficult year for the containershipping sector as we estimate a second year of annual losses because the carriers strategies are being driven by market share rather than by earnings, and the delivery of larger-sized vessels (+10,000 TEU) has yet to peak. Further, without pricing power, the carriers are left to bear the higher costs. We would turn more positive if 1) the carriers shifted to an earnings-based strategy (which could be reflected through idling capacity) and 2) a shift in the inventory cycle from the current inventory destocking to restocking. However, both have yet to occur and we estimate that 4Q losses are likely to increase sequentially. Drybulk shipping supply problems persist Even factoring newbuilding delivery slippages and the scrapping of the existing drybulk fleet, we estimate that 2012 will be the fourth year of consecutive double-digit-percentage supply growth. This is, we think, where the problem lies as demand has yet to grow by double-digitpercentages. With the BDI rebounding from its YTD low of 1,043 to over 1,800, we believe the worsening of the supply imbalance is likely to lead to drybulk freight rates coming under increasing pressure. We see the BDI averaging 1,619 in 2012. We believe that the key to the outlook is: 1) newbuilding delivery slippages (but YTD slippage is only 29%) and 2) global steel demand as iron ore and coal is transported mainly on Capesize vessels and these vessels drive BDI. However, the Capesize orderbook as a percentage of the fleet is currently 41% with YTD Capesize newbuilding slippage at only 29%. How to play Singapore shipping sector? Based on the shipping outlook and shipping businesses valued at one standard deviation below mid-cycle, we have a Reduce rating on NOL (target price SGD1.00) and a Buy rating on STX Pan Ocean (target price SGD8.70). Although we have a Buy rating on STX Pan Ocean, this is based on valuation and we see few near-term positive catalysts. With annual losses smaller than historical record losses, we believe shipping stocks should not trade at trough multiples. Based on trough P/B multiples, this would imply target prices of SGD0.47 for NOL (based on 0.4x multiple) and SGD5.31 for STX Pan Ocean (based on 0.5x multiple).
Current Company NOL STX Pan Ocean Ticker NOL SP STX SP Price * 1.07 7.60 Target Price 1.00 8.70 Potential upside/ (downside) (%) -6.1 14.5 Rating Reduce Buy Market Cap (USDmn) 2,122 1,337
Anchor themes Shipping sector remains under pressure from irrational behaviour and supply problems. Without pricing power, carriers bear the higher costs. Recovery in shipping, irrespective of container or drybulk, is not around the corner. Hence, too early to turn positive. Nomura vs consensus Below consensus earnings and target price for NOL due to our estimate of lower freight rates in 2012.
Research analysts Asia Shipping Andrew Lee - NIHK andrew.lee@nomura.com +852 2252 6197 Cecilia Chan - NIHK cecilia.chan@nomura.com +852 2252 6181
Source: Datastream, Nomura estimates
Nomura | Shipping
November 21, 2011
Shipping remains under pressure

Despite the Asian container and drybulk shipping sector indices declining by 49% and 35%, respectively, since end-2010, we maintain our bearish view on the shipping sector in general, given our Bearish view on container shipping and our Neutral view on drybulk shipping. For container shipping, we estimate 2012 is likely to be the second consecutive lossmaking year due to 1) irrational carrier behaviour as carriers seem to focus on market share rather than on earnings, 2) continued supply pressure on long-haul routes given the slated delivery schedule of large-sized +10,000 TEU sized vessels as we estimate another 64 are slated to be delivered by end-2012 compared with the 35 delivered in the first 10 months of 2011, and 3) cost inflation, especially of bunker oil prices, as carriers struggle to pass through higher costs. Further, with increasing concern about global economic growth, especially in the US and Europe, demand could disappoint in 2012. Despite this gloomy container outlook, we would turn more positive if: 1) carriers switched strategy to focusing on earnings rather than on market share, a clear sign of which would be an increase in idle capacity (but idle capacity is now only 2.9% from a peak of 12% in December 2009), and 2) inventory restocking, as this would drive container volumes, though we estimate that the inventory destocking period is just starting. These potential positive factors have yet to materialise. Despite the BDI rebounding from a 2011 low of 1,043 in early February to currently over 1,800, we see the BDI averaging only 1,619 in 2012 due to continued supply pressure. Supply remains a key problem as the orderbook as a percentage of the fleet remains at 38% and we estimate net supply growth of 10.6% in 2012F, which would be the fourth consecutive year of double-digit-percentage supply growth. If we assumed no delays to newbuilding deliveries and no scrapping of the existing fleet, 2012 supply growth would be 13.3%. Given that China is the key demand driver (46% of global steel production in 9M11), concerns over a soft or a hard landing is likely to affect demand given that 50% of Chinas steel demand is from the construction sector. More importantly, we estimate that BDI breakeven for owned vessels is 1,500 and that for chartered vessels is 2,500. We would turn more positive on the drybulk sector if 1) newbuilding delivery slippage increases, which could be possible as ship financing has becoming increasingly more difficult and 49% of the global drybulk orderbook is estimated to be delivered from Chinese shipyards, and 2) global steel demand improves as steel-making ingredients of iron ore and coal are the main commodities transported on Capesize vessels, which in turn drives BDI. However, the Capesize orderbook as a percentage of the fleet is currently 41% with YTD Capesize newbuilding slippage at only 29%.
Fig. 115: Container recovery sign: Inventory restocking. However, chart highlights US is in an inventory destocking stage
35 30 25 20 15 10 5 0 (5) (10) (15) (20) (Restocking)
Too early to turn positive on shipping, irrespective of whether container or drybulk
2012 is likely to be second consecutive year of losses for container shipping sector
Container carrier strategy key (market share vs earnings) as well as inventory cycle (destocking vs restocking)
Despite rebound in BDI, supply remains key problem
To turn more positive on drybulk sector newbuilding delivery slippage and steel demand
Fig. 116: Drybulk recovery sign: Newbuilding delivery slippage. However, YTD slippage only 29% and orderbook as percentage of fleet at 38%
(mn dwt) 20 18 16 14 12 10 8 6 4 2 0 Expected deliveries Actual deliveries
(Destocking)
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
May-09
May-10
May-11
Source: Drewry, Company data, Nomura estimates
Source: Clarksons, Nomura estimates
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Nomura | Shipping
November 21, 2011
Valuations
Given our industry outlook for the container and drybulk shipping sectors, we have a Reduce rating on NOL (6.1% potential downside) and Buy rating on STX Ocean (14.5% potential upside, but we believe that the drybulk sector is likely to lack near-term positive catalysts). For NOL, our sum-of-the-parts SGD1.00 target price is based on shipping business at mid-cycle minus one standard deviation multiple of 0.7x FY12F P/BV multiple and 20% discount to global logistics 3.0x P/B for logistics business. STX Pan Oceans SGD8.70 target price is based on one standard deviation below mid-cycle P/BV (0.7x) given we estimate losses in 2011 and 2012.
Reduce on NOL; Buy on STX Pan Ocean but lacking catalysts
Risks that may impede the achievement of the target price

For STX Ocean, company-specific risks include aggressive fleet expansion plans and potential expansion into other non-core businesses. For Neptune Orient Lines, company-specific risks include divestment of terminals. Upside risk includes aggressive control of capacity hence leading to slightly more pricing power. Downside risk includes an aggressive newbuilding ordering spree.
Scenario analysis
With annual losses smaller than historical record losses, we believe shipping stocks should not trade at trough multiples. If we assume the stocks would trade at trough P/B multiples, this would imply target prices of SGD0.47 for NOL (based on 0.4x multiple) and SGD5.31 for STX Pan Ocean (based on 0.5x multiple).
64
Nomura | Shipping
November 21, 2011
Fig. 117: NOL (NOL SP) P/BV vs ROE

(x) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Price to Book (LHS) ROE (RHS) (%) 60 40 20 0 (20) (40) (60) (80) (100) (120) (140) (160)
Fig. 118: NOL share price and freight rates

(SGD/share) 7 6 5 4 3 2 1 (USD/TEU) 1,300 1,200 1,100 1,000 900 800
NOL share price (LHS) Average industry freight rates (RHS)
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Datastream, Shanghai Shipping Exchange
Fig. 119: STX Pan Ocean (STX SP) P/BV vs ROE

(x) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Price to Book (LHS) ROE (RHS) (%) 60 50 40 30 20 10 0 (10)
Fig. 120: STX Pan Ocean share price and BDI

(SGD/share) 45 40 35 30 25 20 15 10 5 0 Stock price (LHS) BDI (RHS) 14,000 12,000 10,000 8,000 6,000 4,000 2,000
Source: Datastream
Fig. 121: Singapore shipping valuation comparison

15-Nov-11 Company NOL Containers industry average STX Pan Ocean (SGX) Bulkers industry average
Note: Date as at 15 November 2011 Source: Datastream, Nomura estimates
Current Ticker NOL SP STX SP Price * 1.07 7.60
Target Price 1.00 8.70
Potential upside/ (downside) (%) -6.1 14.5 Rating Reduce Buy
Market Cap (USDmn) 2,122 1,337
P/E (x) 11F n.m. 43.8 n.m. 14.1 12F n.m. 61.4 n.m. 12.0
P/B (x) 11F 0.7 0.9 0.6 0.7 12F 0.8 1.1 0.6 0.8
Dec-10
Jan-05
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Jan-07
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ROE (%) 11F (9.1) (15.8) (6.4) (6.6) 12F (9.8) (18.9) (0.4) (3.4)
65
Biosensors International
HEALTH CARE & PHARMACEUTICALS
BIOS.SI BIG SP
EQUITY RESEARCH
Strong EPS growth ahead
November 21, 2011 Rating Remains Target price Remains Closing price November 15, 2011 Potential upside
DESigned for growth
Buy
SGD 1.70 SGD 1.39 +22.3%
Action: Strong EPS growth profile We see earnings growth from market share gains in Japan and the EU underpinned by strong clinical data. Consolidation of JWMS earnings should also help lift earnings while the group balance sheet is strengthened post the restructuring of JWMS. Reiterate Buy with a target price of SGD1.70. Catalysts: Continued strong gains from Japan Its licensee, Terumo, has gained significant market share in Japan, which we believe should peak at ~40% by FY14F. Biosensors is also gaining share in the EU and emerging markets. With encouraging data and potential CE Mark approval for BioFreedom, we believe the group is positioning itself for the next phase of growth with this polymer-free DES. Possible M&A to strengthen franchise Potential conversion of the USD120mn notes owned by Weigao would further strengthen Biosensors balance sheet. Biosensors should now have the flexibility to embark on M&A to strengthen its position further. Risks: ASP pressure in China Pricing pressure due to a new tender process in China could dilute JWMS earnings growth, in our view, but this should be cushioned by increased volume growth. Valuation: Attractive given the strong EPS growth profile Biosensors is trading below our sum-of-the-parts valuation of SGD1.70.
31 Mar Currency (USD) FY11 Actual Old FY12F New Old FY13F New Old FY14F New
Anchor themes With the restructuring of JWMS and revenue contribution from Japan in FY12F, Biosensors is well positioned for the next stage of its growth, in our view. We believe it may expand into adjacent products via acquisitions. Nomura vs consensus Our FY Mar 2013F estimates are 2% above consensus, as we are more positive on the group's market-share assumptions for Japan.
Research analysts Singapore Health Care & Pharmaceuticals Jit Soon Lim, CFA - NSL jitsoon.lim@nomura.com +65 6433 6969
Revenue (mn) Reported net profit (mn) Normalised net profit (mn) Normalised EPS Norm. EPS growth (%) Norm. P/E (x) EV/EBITDA (x) Price/book (x) Dividend yield (%) ROE (%) Net debt/equity (%)
157 45 54 4.97c 69.2 22.2 17.2 3.0 na 17.1
295 454 105 7.17c 44.3 N/A 9.8 N/A N/A 59.6
295 454 105 7.17c 44.3 17.2 9.9 1.4 na 59.6
409 153 153 9.53c 32.8 N/A 6.5 N/A N/A 12.6
409 153 153 9.53c 32.8 12.7 6.6 1.4 na 12.6
472 189 189 11.76c 23.5 N/A 4.8 N/A N/A 13.6
472 189 189 11.76c 23.5 10.3 4.9 1.2 na 13.6
net cash net cash net cash net cash net cash net cash net cash
Key company data: See page 2 for company data and detailed price/index chart.
Nomura | Biosensors International
November 21, 2011
Key data on Biosensors International

Incomestatement(USDmn)
Year-end 31 Mar Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (USD) Norm EPS (USD) Fully diluted norm EPS (USD) Book value per share (USD) DPS (USD)
Relative performance chart (one year)

FY10 116 -32 84 -64 21 24 -3 0 21 -4 15 1 33 -2 31 0 0 31 1 32 0 32 FY11 157 -35 122 -78 44 47 -3 0 44 -4 19 0 60 -6 54 0 0 54 -9 45 0 45 FY12F 295 -53 242 -122 120 135 -15 0 120 -8 8 4 124 -19 105 0 0 105 349 454 0 454 FY13F 409 -82 326 -141 185 200 -15 0 185 -5 0 -1 179 -26 153 0 0 153 0 153 0 153 FY14F 472 -93 379 -154 225 240 -15 0 225 -4 0 2 223 -33 189 0 0 189 0 189 0 189
(SGD) 1.5 1.4 1.3 120 1.2 1.1 1 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 100 80 Price Rel MSCI Singapore 160 140
Source: ThomsonReuters, Nomura research

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Hony Capital Shangdong Weigao 1M 13.0 11.1 10.3 1,433.2 78.9 1.47/.96 4.21 3M 12M 6.5 20.9 -0.6 21.9 9.1 35.8
16.9 16.2
Source: Thomson Reuters, Nomura research
53.3 67.5 46.4 na 130.6 7.2 46.7 50.7 72.6 20.5 17.9 27.6 4.9 0.0 1.8 0.8 25.8 23.3
22.2 28.1 25.1 na 43.2 3.0 17.2 18.1 77.9 30.2 28.2 28.5 9.8 0.0 1.8 1.1 17.1 32.9
17.2 21.8 3.5 na 3.3 1.4 9.9 11.0 81.9 45.6 40.6 153.6 15.2 0.0 170.4 34.5 59.6 18.3
12.7 16.1 11.5 na 16.4 1.4 6.6 7.1 79.8 48.9 45.3 37.5 14.5 0.0 5.5 1.5 12.6 15.2
10.3 13.0 9.3 na 11.1 1.2 4.9 5.2 80.3 50.9 47.7 40.1 15.0 0.0 5.0 1.6 13.6 17.7
Notes
Strong licensing revenue from Japan
-2.3 -5.5 -4.4 189.4 185.5
34.9 98.3 112.8 69.2 78.0
88.4 184.6 170.9 44.3 37.0
38.4 48.4 54.4 32.8 35.5
15.5 20.2 21.8 23.5 23.5
3.00c 2.94c 2.61c 0.14 0.00
4.11c 4.97c 4.64c 0.35 0.00
31.00c 7.17c 6.36c 0.78 0.00
9.53c 9.53c 8.61c 0.81 0.00
11.76c 11.76c 10.64c 0.92 0.00
67
Nomura | Biosensors International
November 21, 2011
Cashflow(USDmn)
Year-end 31 Mar EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Reduction in investments Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY10 24 -8 -3 13 -2 11 0 0 -16 0 0 -5 0 1 0 -45 48 4 0 60 60 -31 FY11 47 -8 -11 28 -3 25 0 0 -23 0 -7 -5 0 176 0 0 29 205 199 60 259 -225 FY12F 135 -17 439 556 -503 53 0 0 116 0 -535 -366 0 253 0 0 140 393 27 259 287 -52 FY13F 200 -37 -44 119 -23 96 0 0 0 0 0 96 0 0 0 0 -31 -31 66 286 352 -145 FY14F 240 -18 -48 175 -24 151 0 0 0 0 0 151 0 0 0 0 -16 -16 135 351 487 -293 Notes
Cash position to improve sharply as earnings jump
Balancesheet(USDmn)
As at 31 Mar Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY10 60 0 26 18 7 111 0 10 12 1 94 228 0 2 49 51 29 0 3 83 0 0 162 -45 0 28 145 228
FY11 259 0 40 22 8 329 0 12 17 3 117 478 0 2 59 62 34 0 4 99 0 0 346 -2 0 34 379 478
FY12F 286 0 65 35 9 396 0 515 280 275 1 1,467 80 2 82 164 35 120 4 322 0 0 599 452 0 93 1,144 1,467
FY13F 351 0 92 55 11 509 0 538 280 274 1 1,602 87 4 91 182 0 120 4 305 0 0 599 605 0 93 1,297 1,602
FY14F 487 0 106 62 12 667 0 561 280 274 1 1,783 74 7 92 173 0 120 3 297 0 0 599 795 0 93 1,486 1,783
Notes
Restructuring of JWMS has improved the groups balance sheet significantly
2.17 5.5
5.35 11.6
2.42 15.6
2.80 38.8
3.85 57.0
net cash net cash
net cash net cash
net cash net cash
net cash net cash
net cash net cash
70.1 180.6 33.7 217.0
76.7 209.6 23.9 262.4
65.4 193.6 15.7 243.3
70.3 198.9 14.4 254.9
76.5 230.0 22.9 283.6
68
CapitaCommercial Trust
PROPERTY
CACT.SI CCT SP
EQUITY RESEARCH
Transaction benchmarks to underpin re-rate
Current implied EV of SGD1,451psf for SG office assets appears conservative

Action: Buy; implied EV of SGD1,451psf appears too conservative Excluding strata-titled units, there have been about SGD4.3bn worth of commercial property transactions so far in 2011, on our estimates, and we expect more transactions to be announced in the coming months as PE funds look to raise cash from assets owned while private investors interest appears to have remained strong. Judging from recent transactions, we do not think capital values have to be discounted significantly for prospective private investors to invest, though deals involving partial stakes are more likely. Transaction benchmarks surfacing over the next few months are therefore likely to suggest CCTs current implied EV of SGD1,451psf for its SG office portfolio is too conservative, providing a catalyst for the 29% discount to NAV to narrow, in our view. Catalyst: Transaction benchmarks, better-than-expected results Besides transaction benchmarks, we believe another catalyst for the stock could come from the upcoming results. 3QFY11 DPU was slightly ahead of the consensus forecast and portfolio vacancies were better than market expectation, helping the stock to outperform the market following the results. Our FY12F DPU of 7.4Scts is 2.8% higher than consensus and we believe results will continue to surprise positively in coming quarters. Valuation: TP remains SGD1.47; relatively low recap risk The stock is currently trading at an FY12F yield spread of 490bps over the SG 10Y GB, compared to the historical average of 400bps. In addition, CCTs gearing remains relatively lower than the other REITs under coverage at 0.3x, suggesting minimal recapitalisation risk. Reaffirm Buy.
31 Dec Currency (SGD) FY10 Actual Old FY11F New Old FY12F New Old FY13F New
Buy
SGD 1.47 SGD 1.14 +28.9%
Anchor themes Three themes could play out in 2012F: 1) private housing inventory build-up, 2) more sales of partial stakes in office assets, and 3) suburban retail property market could be weaker than expected. Transaction benchmarks are likely to prompt a valuation reassessment for CMA and CCT, in our view. Nomura vs consensus Our TP is 14% above consensus. The implied EV for CCT's SG office portfolio remains too conservative.
Revenue (mn) Income for distribution (mn) Normalised dist income (mn) Normalised DPU Norm. DPU growth (%) Norm. P/E (x) BVPU Price/book (x) DPU yield (%) ROE (%) Gearing (%)
392 542 221 0.1 -16.8 14.5 1.5 0.8 6.9 13.2 31.5
360 209 209 0.1 -5.6 N/A 1.5 N/A 6.1 4.9 27.9
360 209 209 0.1 -5.6 15.4 1.5 0.8 6.5 4.9 27.9
363 210 210 0.1 0.1 N/A 1.5 N/A 6.2 4.9 27.4
363 210 210 0.1 0.1 15.4 1.5 0.8 6.5 4.9 27.4
375 214 214 0.1 1.6 N/A 1.5 N/A 6.2 5.0 29.2
375 214 214 0.1 1.6 15.1 1.5 0.8 6.6 5.0 29.2
Nomura | CapitaCommercial Trust
November 21, 2011
Key data on CapitaCommercial Trust

Incomestatement(SGDmn)
Year-end 31 Dec Rental income Other Revenue Revenue Land rent & property tax Property management fees Other operating expenses Management expenses Trust expenses Other operating expenses EBITDA Depreciation Amortisation of intangible assets EBIT Net property income Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other & non tax deductible items Preferred dividends Normalised income for distn Extraordinary items Income for distribution Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPU Normalised FDEPU DPU Per unit Reported EPU (SGD) Norm EPU (SGD) Fully diluted norm EPU (SGD) Book value per unit (SGD) DPU (SGD)

FY09 403 403 -38 -21 -44 -20 -2 279 -1 278 300 -86 4 196 196 3 198 -1,035 -836 FY10 392 392 -32 -21 -40 -19 -2 278 -1 278 299 -108 7 177 177 44 221 322 542 FY11F 360 360 -30 -19 -36 -22 -2 251 -1 251 275 -58 4 197 197 13 209 0 209 FY12F 363 363 -30 -19 -37 -22 -2 253 -1 253 277 -60 4 198 198 13 210 0 210 FY13F 375
1.6 (SGD) Price Rel MSCI Singapore 110 105 100 95 90 85 80 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11
375 -31 -20 -38 -22 -2 262 -1 262 286 -65 4 201 201 13 214 0 214
1.4 1.2 1 0.8

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) CapitaLand 1M 4.1 1.4 2,493.4 51.0 1.57/.94 6.41 3M 12M -9.2 -21.4 -6.6 -6.5
2.4 -15.2 -20.7
31.8
Notes
12.1 15.6 na 8.3 0.8 17.4 17.4 69.0 0.0 na
14.5 18.8 5.9 6.9 0.8 15.2 15.2 70.9 0.0 5.0
15.4 19.9 15.4 6.5 0.8 18.4 18.4 69.6 0.0 4.4
15.4 19.8 15.4 6.5 0.8 18.7 18.7 69.6 0.0 4.3
15.1 19.5 15.1 6.6 0.8 18.5 18.6 69.7 0.0 4.3
Lower net interest expenses from FY11F on less borrowings
-2.8 -0.2 -0.2 -16.8 -16.8 -16.8
-8.1 -9.7 -9.7 -5.6 -5.6 -5.6
0.8 0.8 0.8 0.1 0.1 0.1
3.4 3.5 3.5 1.6 1.6 1.6
-39.72c 9.43c 9.43c 1.41 0.09
19.25c 7.84c 7.84c 1.51 0.08
7.40c 7.40c 7.40c 1.51 0.07
7.41c 7.41c 7.41c 1.50 0.07
7.53c 7.53c 7.53c 1.50 0.08
70
November 21, 2011
Cashflow(SGDmn)
Year-end 31 Dec EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Acquisition of investment properties Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY09 279 3 14 296 -26 270 -1 FY10 278 223 -177 324 -30 294 578 FY11F 251 -10 30 271 -30 241 -335 FY12F 253 1 10 265 -30 235 -90 FY13F 262 4 6 271 -30 241 -90 Notes
Acquisition of investment properties include capex on MSCP redevelopment
2 271 -175 805 -558 -98 -25 246 67 312 1,691
6 878 -215 0 -257 -83 -554 324 312 636 1,111
6 -88 -212 0 -80 -60 -353 -440 636 196 1,471
5 150 -210 0 0 -60 -270 -121 196 75 1,592
5 156 -213 0 133 -65 -145 11 75 86 1,714
Balancesheet(SGDmn)
As at 31 Dec Cash & equivalents Accounts receivable Other current assets Total current assets Investment properties Acquisitions Capital expenditure Net appreciation in value Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Non convertible prefs Total unitholders' funds Total units' funds & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)
FY09 312 9 183 504 5,533
FY10 636 6 0 642 5,487
FY11F 196 5 0 201 5,916
FY12F 75 5 0 81 6,006
FY13F 86 5 0 92 6,096
Notes
SGD570mn secured term loan facility due in March 2012 for refinancing
63 6,100 235 71 20 326 1,769 49 2,144
67 6,196 859 103 24 986 888 48 1,922
67 6,185 570 94 23 687 1,097 128 1,912
67 6,154 224 95 23 342 1,443 97 1,882
67 6,255 0 98 24 122 1,800 62 1,984
3,956
4,274
4,273
4,272
4,271
3,956 6,100
4,274 6,196
4,273 6,185
4,272 6,154
4,271 6,255
3.2 35.8 6.1 42.8
2.6 31.5 4.0 26.0
4.3 27.9 5.9 34.4
4.2 27.4 6.3 37.3
4.0 29.2 6.5 40.1
-207.4
138.4 0.06 8.8 1.5 13.2
58.2 0.06 3.4 1.4 4.9
58.0 0.06 3.4 1.4 4.9
57.1 0.06 3.5 1.5 5.0
71
November 21, 2011
Fig. 122: NAV breakdown

NLA (mn FY12F NPI sq ft)/ @ 100% (S$ rooms mn) SG portfolio Capital Tower 6 Battery Road HSBC Building Bugis Village Golden Shoe Car Park Market Street Car Park MSCP redevelopment One George Street Wilkie Edge Raffles City Singapore - 60% stake retail office hotel & convention Total/average (excl. Raffles City hotel) 0.741 0.499 0.200 0.122 0.044 0.288 0.448 0.146 0.252 0.228 1,218 2.970 50 54 10 9 8 0 49 8 41 15 37 244.0 Capital value (S$ mn) 1,256 1,067 316 73 105 527 836 183 653 390 910 5,406.5 Capital value (S$ psf/S$ per rm) 1,695 2,139 1,577 597 2,371 1,831 1,865 1,251 2,585 1,711 747,317 1,821
Implied yield % 4.0 5.1 3.1 12.3 7.6 0.0 5.9 4.4 6.3 4.0 4.0 4.5
Listed entity Quill Capita Trust
Bloomberg O/S shares ticker Stake (%) (mn) QUIL MK 30.00 390.1
Price (S$) 0.4
50
Gross asset value S$ mn Less adjusted net debt S$ mn NAV S$ mn Outstanding units (mn) NAV per unit (S$) Price target
6,366 1,824 4,543 2,833 1.60 1.47
Fig. 123: TP derivation

FY12F DPU forecast S$ SG 10Y GB yield % (as of 2 Sep 2011) historical avg yield spread % implied fair trading yield % Implied fair value on yield S$ NAV S$/unit Price target (50:50 wtd avg), S$
0.074 1.6 4.0 5.6 1.33 1.60 1.47
72
November 21, 2011
Fig. 124: NPI (SGD mn) and DPU (Scts)

(SGDmn) 310 300 290 8 280 270 260 FY09 FY10 FY11F FY12F FY13F
Fig. 125: Gearing (x)

DPU (RHS) (Scts) 10 (x) 0.35 0.30 0.25 0.20 7 0.15 0.10 FY09 FY10 FY11F FY12F FY13F
NPI (LHS)
Net Debt / TA
Fig. 126: Debt maturity profile (SGD mn)

As of end-September 2011
Fig. 127: Intrinsic value breakdown (%)

Others 11%
(SGDmn) 700 600 500 400 300 200 100 0 2011 2012
Debt maturity profile
Capital Tower 20%
Raffles City stake 31%
6 Battery Road 17%
2013
2014
2015
2016
One George St 13%

Market Street 8%
Fig. 128: Historical P/B (x)

(X) 1.2 1 0.8 0.6 0.4 0.2
May-04 Sep-04 Dec-04 Mar-05 Jul-05 Oct-05 Jan-06 May-06 Aug-06 Nov-06 Feb-07 Jun-07 Sep-07 Dec-07 Mar-08 Jul-08 Oct-08 Jan-09 May-09 Aug-09 Nov-09 Mar-10 Jun-10 Sep-10 Dec-10 Apr-11 Jul-11 Oct-11
Fig. 129: Historical yield (%)

Average SD +
(%) 20 18 16 14 12 10 8 6 4 2 0 CapitaCommercial Trust Yield Historical Average
Rolling PBV SD -
Jan-05 Jun-05 Oct-05 Feb-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Apr-08 Aug-08 Dec-08 Apr-09 Sep-09 Jan-10 May-10 Sep-10 Feb-11 Jun-11 Oct-11
73
November 21, 2011
Valuation Methodology
Our target price of SGD1.47 is the average of 1) our NAV estimate of SGD1.60 (implied initial yield of 4.5%) and 2) fair value of SGD1.33 based on historical trading yield spread of 400bps over the SG 10Y GB and FY12F DPU forecast of SGD0.074.

A worse-than-expected economic performance is likely to cause housing demand and leasing demand to slow, which is likely to widen the discount to NAV that the stock trades at, in our view.
74
ComfortDelGro Corp
TRANSPORT/LOGISTICS
CMDG.SI CD SP
EQUITY RESEARCH
Steady home market, growing overseas segment
Earnings and dividends supported by reliable cashflow

Action: Reaffirm Buy on healthy cashflows from Singapore and overseas transport operations; attractive valuation & dividend yield With its growing overseas public transport franchise and steady cash flow from its Singapore bus, rail and taxi operations, ComfortDelgro will likely weather macro headwinds better than most of its peers, in our view. We think the group has managed margins well despite rising fuel and energy costs, and the profitability of its Singapore taxi business has also mostly recovered to pre-competition days despite the presence of new players. Catalyst: Overseas growth and increased market share in rail CDs 3Q11 net earnings of SGD69mn (+12.5% y-y) were ahead of our and market estimates, as its overseas operations saw robust growth (3Q11 overseas EBIT increased 13% y-y to SGD53mn, accounting for 62% of group EBIT of SGD85mn). We expect the group to continue to grow its overseas business, both organically and through strategic acquisitions or joint ventures. Singapore taxi is expected to benefit from a larger and newer fleet and from more cashless transactions. CDs securing of the Downtown Line (DTL) tender should raise its rail market share, although earnings contribution will likely only be in 2019, on our estimates. Valuation: Trading at lower end of P/E and P/B bands, yield attractive At SGD1.42, FY11/12/13F P/Es of 13x/12x/11x are at the lower end of its historical P/E band 10-20x, while FY12/13F P/B of 1.4x and dividend yield of 4.5% remain attractive. Our DCF-based TP of SGD1.72 offers 21% upside potential.
Buy
SGD 1.72 SGD 1.42 +21.1%
Anchor themes Singapores long-term goal of having at least 70% (from current 63%) of its population relying on public transport by 2020 means the two incumbent government-linked operators stand to benefit from higher ridership, particularly in the bus and rail segments. Nomura vs consensus Our FY11F earnings and price target are broadly in line with consensus estimates.
Research analysts Singapore Transport/Logistics Lisa Lee - NSL lisa.lee@nomura.com +65 6433 6979
31 Dec Currency (SGD)
FY10 Actual Old
FY11F New Old
FY12F New Old
FY13F New
3,207 229 229 10.95c 4.1 12.9 4.5 1.6 3.8 13.1 8.0
3,157 229 229 10.97c 0.2 N/A 4.1 N/A N/A 12.3 10.3
3,157 229 229 10.97c 0.2 12.9 4.4 1.5 4.1 12.3 10.3
3,338 253 253 12.11c 10.4 N/A 4.0 N/A N/A 12.8 15.7
3,338 253 253 12.11c 10.4 11.7 4.2 1.4 4.5 12.8 15.7
3,485 266 266 12.73c 5.1 N/A 3.9 N/A N/A 12.6 21.9
3,485 266 266 12.73c 5.1 11.1 4.2 1.4 4.5 12.6 21.9
Nomura | ComfortDelGro Corp
November 21, 2011
Key data on ComfortDelGro Corp

Year-end 31 Dec Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY09 3,052 -2,422 630 -280 350 630 -280 0 350 -24 8 0 334 -58 276 -56 0 0 220 0 220 -111 109 FY10 3,207 -2,528 679 -291 388 679 -291 0 388 -36 6 7 366 -78 288 -60 0 0 229 0 229 -113 116 FY11F 3,157 -2,440 717 -316 401 717 -316 0 401 -53 7 0 354 -64 290 -61 0 0 229 0 229 -121 108 FY12F 3,338 -2,573 766 -334 432 766 -334 0 432 -54 7 0 384 -69 315 -62 0 0 253 0 253 -131 121 FY13F 3,485 -2,667 819 -349 470 819 -349 0 470 -72 7 0 404 -73 331 -66 0 0 266 0 266 -131 134
(SGD) 1.7 1.6 1.5 1.4 1.3 1.2 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 115 110 105 100 95 90

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) 1M 4.8 3.0 2,286.7 87.8 1.64/1.25 3.45 3M 12M 8.0 0.8 -6.3 -5.5 8.6
2.1 10.6
Singapore Labour 12.2 Foundation Source: Thomson Reuters, Nomura research
13.4 16.3 13.4 3.7 4.1 1.7 4.8 8.6 20.6 20.6 11.5 7.2 17.5 50.4 11.7 1.3 13.5 11.0
12.9 15.7 12.9 3.8 4.8 1.6 4.5 7.9 21.2 21.2 12.1 7.1 21.3 49.3 13.9 1.5 13.1 10.7
12.9 15.7 12.9 4.1 3.8 1.5 4.4 7.7 22.7 22.7 12.7 7.3 18.0 52.9 14.3 1.4 12.3 10.3
11.7 14.2 11.7 4.5 3.8 1.4 4.2 7.5 22.9 22.9 12.9 7.6 18.0 52.0 14.4 1.4 12.8 10.2
11.1 13.5 11.1 4.5 3.5 1.4 4.2 7.2 23.5 23.5 13.5 7.6 18.0 49.5 14.3 1.4 12.6 10.2
Notes
Steady earnings despite higher fuel and labour costs
-2.2 16.3 25.9 26.4 26.4
5.1 7.9 11.0 4.1 4.1
-1.6 5.5 3.2 0.2 0.2
5.8 6.8 7.7 10.4 10.4
4.4 7.0 8.9 5.1 5.1
10.52c 10.52c 10.52c 0.81 0.05
10.95c 10.95c 10.95c 0.86 0.05
10.97c 10.97c 10.97c 0.92 0.06
12.11c 12.11c 12.11c 0.98 0.06
12.73c 12.73c 12.73c 1.05 0.06
76
Nomura | ComfortDelGro Corp
November 21, 2011
Cashflow(SGDmn)
Year-end 31 Dec EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Reduction in investments Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY09 630 110 -13 727 -357 371 -178 83 -131 172 -36 282 -109 0 0 0 -95 -204 77 408 486 111 FY10 679 -70 3 612 -447 165 13 -97 -45 91 78 205 -105 0 0 0 -19 -124 81 486 567 145 FY11F 717 61 1 779 -450 329 -14 -68 192 12 -150 303 -107 0 0 0 -184 -291 12 567 579 198 FY12F 766 5 1 772 -480 292 -25 -18 0 12 -75 187 -115 0 0 0 -66 -181 6 579 585 321 FY13F 819 26 1 846 -500 346 42 -18 0 13 -151 233 -125 0 0 0 -219 -344 -111 585 473 478 Notes
Strong operating cashflow to help support ongoing capex to replace older taxis and buses in Singapore and other countries
Balancesheet(SGDmn)
As at 31 Dec Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY09 486 27 99 55 198 863 528 2,237 129 0 295 4,052 130 522 200 852 466 0 521 1,840 522 0 562 1,128 0 0 1,690 4,052
FY10 567 25 103 59 247 1,001 513 2,381 146 0 340 4,381 188 544 166 898 523 0 613 2,034 547 0 566 1,235 0 0 1,801 4,381
FY11F 579 25 108 62 231 1,005 528 2,861 146 0 148 4,688 198 587 176 961 579 0 625 2,165 609 0 566 1,349 0 0 1,914 4,688
FY12F 585 26 114 65 234 1,023 554 3,165 146 0 148 5,036 297 593 187 1,078 608 0 637 2,323 671 0 566 1,477 0 0 2,042 5,036
FY13F 473 95 120 68 241 997 581 3,469 146 0 148 5,341 312 623 200 1,135 639 0 650 2,423 737 0 566 1,616 0 0 2,181 5,341
Notes
Low gearing allows to further potential bolt-on acquisitions
1.01 14.9
1.11 10.9
1.05 7.5
0.95 7.9
0.88 6.5
0.18 6.6
0.21 8.0
0.28 10.3
0.42 15.7
0.58 21.9
12.0 8.0 71.1 -51.1
11.5 8.2 77.0 -57.3
12.2 9.0 84.6 -63.4
12.2 9.0 84.0 -62.8
12.2 9.1 83.2 -61.9
77
CapitaMalls Asia
PROPERTY
CMAL.SI CMA SP
EQUITY RESEARCH
More valuation benchmarks II
Room for further re-rating as capital is put to work in China in 2012F

Action: Reaffirm Buy; more valuation benchmarks to surface We highlighted CMAs conservative book value of its assets in China in our September report. Since then, the stock has outperformed the market and is now trading at a narrower P/B but we think there is more room for a re-rating. We believe transactions continue to suggest the discount ascribed to CMAs portfolio value is unjustified; for example, the Changsha commercial site that was awarded last week or Hong Kong-based NWDs recent purchase of a 95% equity stake in a Shanghai mall. As more capital is put to work in China by Hong Kong and Singapore developers in 2012F, we see more transaction benchmarks surfacing in support of CMAs portfolio value. Catalyst: Transaction benchmarks and 2012F turnaround in China Besides transaction benchmarks, the turnaround of CMAs China associate malls in 2012F will be a potential catalyst for a further re-rating of the stock, in our view. In this regard, the strategic move to raise equity stakes in Hongkou Plaza and Minhang Plaza is instrumental but remains under-appreciated by the market, in our view. Valuation: Reaffirm Buy with TP of SGD1.66 Our NAV-based target price of SGD1.66 implies potential upside of 22% from the current share price. As a cross-check, our TP implies a FY12F P/B of 1.1x, at a 15% discount to its average 1.3x established since its public listing in November 2009. We reiterate our Buy rating.
Buy
SGD 1.66 SGD 1.36 +22.1%
Anchor themes Transaction benchmarks in China continue to suggest the book valuation of CMA, as well as the current discount ascribed by the market, is conservative, notwithstanding a more cautious outlook on the China property market. The turnaround of CMA's associate malls in China in 2012F will likely narrow that discount, in our view. Nomura vs consensus Our TP for CMA is marginally (0.6%) ahead of consensus valuation.
31 Dec Currency (SGD)
FY10 Actual Old
FY11F New Old
FY12F New Old
FY13F New
Revenue (mn) Reported net profit (mn) Normalised net profit (mn) Normalised EPS Norm. EPS growth (%) Norm. P/E (x) EV/EBITDA (x) Price/book (x) Dividend yield (%) ROE (%) Gearing (%)
245 422 372 9.58c na 14.1 11.5 0.9 1.5 7.5 10.0
224 207 207 5.17c -46.0 N/A 25.5 N/A N/A 3.5 15.8
224 178 178 4.45c -53.5 30.4 29.1 0.9 2.2 3.0 15.9
237 229 229 5.89c 13.9 N/A 21.3 N/A N/A 3.8 17.7
237 229 229 5.90c 32.5 23.0 22.9 0.9 2.2 3.8 19.8
267 271 271 6.98c 18.4 N/A 18.6 N/A N/A 4.4 19.3
267 282 282 7.26c 23.0 18.7 19.6 0.8 3.0 4.6 23.0
Nomura | CapitaMalls Asia
November 21, 2011
Key data on CapitaMalls Asia

Year-end 31 Dec Investment properties Property development Hotels/serviced apartments Other Revenue Revenue EBIT contributions Investment properties Property development Hotels/serviced apartments Other income Management expenses EBITDA Depreciation and amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) EBIT margin (%) Effective tax rate (%) Dividend payout (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY09 135 FY10 94 FY11F 57 FY12F 71 FY13F 100
2.2 2 (SGD) Price Rel MSCI Singapore 110 100 90 80 70 60 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11
94 229 70
151 245 45
166 224 40
166 237 50
166 267 70
1.8 1.6 1.4 1.2 1
-17 59 -6 52 -86 490 456 -16 440 -6
7 59 -7 52 0 345 397 -17 380 -8
1 48 -6 42 -9 159 192 -7 185 -6
-5 51 -6 45 -31 231 245 -10 236 -7
-19 57 -6 51 -46 297 301 -12 289 -7

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) CapitaLand

1M 4.9 4,071.7 35.0 2.13/1.13 8.14 3M 12M 8.6 -35.5
6.7 16.3 -36.1 3.9 18.9 -21.2
65.5
434 -46 388 0 388
372 50 422 -39 383
178 0 178 -78 101
229 0 229 -117 113
282 0 282 -117 165
Notes
na na na 0.7 na 1.0 9.5 9.6 22.9 3.5 0.0 0.0
14.1 17.3 12.5 1.5 95.4 0.9 11.5 11.7 21.1 4.4 9.2 6.8
30.4 37.3 30.4 2.2 na 0.9 29.1 30.1 18.6 3.9 43.5 3.1
23.0 28.1 23.0 2.2 551.7 0.9 22.9 23.5 18.8 3.9 50.8 3.7
18.7 22.9 18.7 3.0 367.3 0.8 19.6 19.9 19.1 3.9 41.3 4.3
Top-line growth principally driven by expected completion of One North in 2012, and Meili and Tianfu malls in 2013
na na na na na
7.2 0.8 -1.2 na na
-8.9 -18.6 -19.8 -53.5 -53.5
6.2 6.2 7.1 32.5 32.5
12.3 12.3 14.1 23.0 23.0
1.41 0.01
10.86c 9.58c 9.58c 1.50 0.02
4.45c 4.45c 4.45c 1.53 0.03
5.90c 5.90c 5.90c 1.56 0.03
7.26c 7.26c 7.26c 1.60 0.04
79
November 21, 2011
Cashflow(SGDmn)
FY09 59 -189 232 102 -4 98 -632 FY10 59 -133 129 55 -6 49 627 FY11F 48 15 -717 -653 -6 -660 -610 FY12F 51 -11 -30 10 -6 3 -283 FY13F 57 -24 -19 14 -6 8 -282 Notes
Assumes completion of acquisition of additional 50% stake in Hongkou Plaza and Minhang Plaza at end2011
-534 0 3,605 -2,500 -164 941 406 138 544 -41
677 -39 0 197 -58 100 777 544 1,321 -621
-1,270 -78 0 500 -37 385 -885 1,321 436 764
-279 -117 0 400 -50 234 -46 436 391 1,209
-275 -117 0 400 -62 221 -53 391 338 1,662
Balancesheet(SGDmn)
As at 31 Dec Cash & equivalents Properties held for sale Accounts receivable Other current assets Total current assets Investment properties Other fixed assets (net) Associates Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Shareholders' Equity Other equity and reserves Total shareholders' equity Total equity & liabilities Leverage Interest cover Gross debt/property assets (%) Net debt/EBITDA (x) Net debt/equity (%) Dupont decomposition Net margin (%) Asset utilisation (x) ROA (%) Leverage (Assets/Equity x) ROE (%)
FY09 544 436 0 980 1,707 15 3,794 6,496 72 378 49 499 431 54 984 53 5,459 5,459 6,496
FY10 1,321 498 -3 1,817 989 13 4,163 6,982 12 295 58 366 688 40 1,094 60 5,829 5,829 6,982
FY11F 436 454 0 890 1,850 13 4,800 7,553 250 269 58 577 950 38 1,565 59 5,929 5,929 7,553
FY12F 391 482 0 872 2,100 13 5,100 8,086 250 286 58 594 1,350 39 1,983 60 6,042 6,042 8,086
FY13F 338 541 0 879 2,400 13 5,400 8,692 250 321 58 629 1,750 43 2,422 62 6,207 6,207 8,692
Notes
Leverage likely to increase on account of capital commitments for ongoing projects
0.61 7.7 net cash net cash
na 10.0 net cash net cash
4.85 15.9 15.9 12.9
1.46 19.8 23.7 20.0
1.10 23.0 29.0 26.8
169.5 na na na na
171.9 0.0 6.3 1.2 7.48
79.8 0.0 2.5 1.2 3.03
96.6 0.0 2.9 1.3 3.83
105.8 0.0 3.4 1.4 4.60
80
November 21, 2011
Fig. 130: Intrinsic NAV breakdown

Est. pro-rata value (SGDmn) Singapore Retail asset: ION Orchard Assets under devt China Retail assets: incl Raffles City assets Assets under devt: incl Raffles City assets 2,444.3 1,918.9 1,401.3 683.2
Malaysia Retail assets Assets under devt Japan Retail assets Assets under devt India Retail assets Assets under devt Listed entities CapitaMall Trust CapitaRetail China Trust CapitaMalls Malaysia Trust Mgmt business Total gross assets Adjusted net borrowings Basic NAV Outstanding shares NAV per share (SGD)
Note: Pricing as of 15 Nov 2011 Source: Nomura estimates, Bloomberg
275.6 0.0
179.9 0.0
12.6 91.4 Bloomberg ticker CT SP CRCT SP CMMT MK Stake (%) 28.7 21.5 41.7 Price (SGD) 1.7 1.2 0.6 1,623.4 170.9 361.7 1,369.2 10,532.3 1,559.4 8,973.0 3,885.1 2.31
81
November 21, 2011
Fig. 131: Price target derivation

Total GAV (SGDmn) less listed entities (SGDmn) GAV less listed entities (SGDmn) ascribed discount % Discounted GAV less listed entities (SGDmn) add listed entities (SGDmn) less adj net borrowings Adjusted NAV (SGDmn) divide by share base (mn) Price target (SGD)
10,532.3 2,155.9 8,376.4 30.0 5,863.5 2,155.9 1,559.4 6,460.1 3,885.1 1.66
Fig. 132: Revenue

(SGDmn) 300 250 200 150 100 50 0 FY09 FY10 FY11F FY12F FY13F
Fig. 133: Cash and borrowings

(SGDmn) Cash (LHS) Total debt (LHS) Net debt/equity (RHS) 2,000 1,500 1,000 500 0 FY09 FY10 FY11F FY12F FY13F
(%) 30 25 20 15 10 5 0 (5) (10) (15)
Rental Income
Mgmt business & others
2,500
Fig. 134: Intrinsic value mix
Fig. 135: Historical P/B

2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 P/B (x) Mean (x)
Others 8.8% Mgmt business 13.0%
SG retail assets (exCMT) 19.8%
CMT 15.4%
Nov-09
Sep-10
Nov-10
May-10
May-11
Sep-11
82
Jan-10
Jan-11
Jul-10
Mar-10
Mar-11
Jul-11
China retail assets (incl. CRCT) 43.1%
November 21, 2011
Fig. 136: Organisational structure
Temasek 39.7%
CAPL SP
65.5%
CMA SP 21.5% 29.9% 41.7%
CRCT SP
CT SP
CMMT MK
19.6%
Valuation methodology
Our SGD1.66/share target price is derived after applying a 30% discount to CMA's GAV less listed entities, which is calculated based on: 1) an average cap rate of 6% and discount rate of 9% for China malls, and 2) an average cap rate of 5.25% and discount rate of 7% for Singapore malls. Listed entities are valued based on either our fair value (for stocks that we cover) or the latest market prices. We then cross-check our TP with the historical P/B at which the stock has traded.

CMA operates in multiple geographies, notably Singapore, China and Malaysia. Changes to the economic, regulatory and property market outlook could have a material impact on our assessment for both rental growth and capitalisation rates, which could in turn have a material impact on our net asset valuation and subsequently our target price.
83
Fraser and Neave

CONGLOMERATES
FRNM.SI FNN SP
EQUITY RESEARCH
Resilient earnings and strong balance sheet
Extending its F&B franchise
Buy
SGD 7.29 SGD 6.26 +21.4%
Action: F&B franchise to tap growth in ASEAN Leveraging its core franchise in Malaysia, we believe F&N is positioning itself to grow its soft-drinks franchise in the ASEAN region, and to that end is targeting Indonesia, Thailand and Indochina. Meanwhile, its brewery business should in our view continue to benefit from growth in PNG, Vietnam and Indonesia. Lower development profits in FY2012 could be supplemented by divestment gains. We maintain our Buy rating for F&N with a target price of SGD7.29. Expansion into Singapore/ASEAN to cushion loss of Coke contract F&Ns expansion into Singapore and other ASEAN markets will help cushion the loss in volume from Coke in FY12, in our view. Meanwhile, we expect the dairies business to recover from FY11 margin pressures, but recovery could be impacted by down time in Thailand. Breweries well positioned in Oceania, Vietnam and Indonesia The brewery unit should benefit from the growth prospects in PNG, Vietnam and Indonesia while underpinned by mature markets like Singapore and New Zealand. Property development profits to be augmented by divestments Development profits should weaken in 2012 as projects in Singapore are booked but this will be cushioned by divestment gains. Overseas projects should contribute meaningfully in FY2013. Balance sheet is strong with gearing below 40% Longer term, the F&B and property activities could be separated.
Anchor themes F&N is expanding its F&B business to the size of its property business via organic growth and M&A. We think it could eventually demerge its property and F&B activities. Nomura vs consensus Our FY12F profit is 10% below consensus, likely due to our recognition of the change in accounting rules for Australia, while our TP is 8% above, as we recognise the value of F&Ns growing F&B franchise.
Research analysts Singapore Conglomerates Jit Soon Lim, CFA - NSL jitsoon.lim@nomura.com +65 6433 6969
30 Sep Currency (SGD)
FY10 Actual Old
FY11F New Old
FY12F New Old
FY13F New
5,697 660 583 41.69c 24.3 12.9 8.7 1.2 3.2 10.7 46.8
6,152 701 593 42.15c 1.1 N/A 7.8 N/A N/A 10.6 37.7
6,274 795 620 44.07c 5.7 12.2 7.7 1.1 3.1 11.6 34.3
6,523 614 614 43.60c 3.4 N/A 7.4 N/A N/A 8.8 31.7
6,340 639 639 45.36c 2.9 11.9 7.7 1.0 3.1 8.8 34.2
8,281 827 827 58.78c 34.8 N/A 5.9 N/A N/A 10.9 24.9
8,066 831 831 59.00c 30.1 9.1 6.0 1.0 3.1 10.6 27.8
Nomura | Fraser and Neave
November 21, 2011
Key data on Fraser and Neave

Year-end 30 Sep Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY09 5,333 -3,558 1,775 -1,002 0 773 935 -162 0 773 -62 14 12 737 -179 558 -83 -8 0 466 -114 352 -188 164 FY10 5,697 -3,709 1,988 -999 0 989 1,141 -152 0 989 -62 63 19 1,009 -270 738 -242 86 0 583 77 660 -238 422 FY11F 6,274 -4,162 2,112 -1,041 0 1,071 1,212 -141 0 1,071 -54 69 12 1,098 -299 799 -239 60 0 620 175 795 -238 557 FY12F 6,340 -4,370 1,970 -896 0 1,073 1,245 -172 0 1,073 -46 61 12 1,100 -204 897 -258 0 0 639 0 639 -238 400 FY13F 8,066 -5,463 2,603 -1,222 1,381 1,555 -174 1,381 -46 63 12 1,410 -303 1,107 -276 0 0 831 0 831 -238 592
(SGD) 6.8 6.6 6.4 6.2 6 5.8 5.6 5.4 5.2 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 120 115 110 105 100 95 90 85

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Kirin Holdings Great Eastern Limited 1M 3M 12M -3.8 7.8 3.5
-9.0 -14.0 -8.2 -13.0 2.1 6,220.4 60.0 6.85/5.25 9.91 -0.5
15.0 10.0
16.1 22.7 21.3 2.5 3.7 1.3 11.8 14.3 33.3 17.5 14.5 6.6 24.3 53.4 8.9 2.9 6.3 6.4
12.9 18.2 11.4 3.2 na 1.2 8.7 9.9 34.9 20.0 17.4 11.6 26.8 36.1 -1.4 -0.5 10.7 8.8
12.2 17.3 9.5 3.1 4.2 1.1 7.7 8.7 33.7 19.3 17.1 12.7 27.2 30.0 9.3 4.1 11.6 9.5
11.9 16.8 11.9 3.1 18.5 1.0 7.7 8.9 31.1 19.6 16.9 10.1 18.5 37.3 9.7 3.6 8.8 9.1
9.1 12.9 9.1 3.1 3.8 1.0 6.0 6.7 32.3 19.3 17.1 10.3 21.5 28.7 5.7 2.7 10.6 10.9
Notes
Strong earnings contribution from F&B business and property investment
6.9 6.4 5.9 10.0 10.0
6.8 22.0 28.0 24.3 24.3
10.1 6.2 8.2 5.7 5.7
1.0 2.8 0.3 2.9 2.9
27.2 24.9 28.6 30.1 30.1
25.32c 33.54c 33.54c 4.02 0.14
47.22c 41.69c 41.69c 4.40 0.17
56.51c 44.07c 44.07c 4.89 0.17
45.36c 45.36c 45.36c 5.15 0.17
59.00c 59.00c 59.00c 5.59 0.17
85
November 21, 2011
Cashflow(SGDmn)
Year-end 30 Sep EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Reduction in investments Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY09 935 793 317 2,046 -474 1,572 -26 0 -353 -20 -1,173 0 -62 11 -134 0 796 611 611 1,033 1,644 3,658 FY10 1,141 -283 -915 -56 79 23 -720 0 91 48 558 0 -316 33 -726 0 1,066 56 56 1,643 1,699 2,876 FY11F 1,212 118 468 1,798 -582 1,216 3 0 -74 106 -1,250 0 -460 43 -611 0 929 -100 -100 1,699 1,599 2,364 FY12F 1,245 -563 -272 410 -615 -205 -72 0 41 -90 326 0 -238 0 118 0 120 0 0 1,600 1,600 2,482 FY13F 1,555 -473 899 1,981 -463 1,519 0 0 3 -1,522 0 -238 0 -293 0 532 0 0 1,600 1,600 2,188 Notes
Strong cashflow to pay for special and higher dividends
Balancesheet(SGDmn)
As at 30 Sep Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY09 1,643 0 971 4,431 281 7,326 725 4,854 0 420 542 13,868 1,693 1,442 302 3,437 3,608 0 139 7,184 1,099 0 1,342 0 0 4,243 5,585 13,868
FY10 1,699 0 1,274 4,701 59 7,733 1,445 3,243 0 650 451 13,523 1,909 1,489 323 3,721 2,666 0 187 6,574 806 0 1,375 0 0 4,768 6,143 13,523
FY11F 1,600 0 1,279 4,477 142 7,498 1,442 3,664 0 643 525 13,772 748 1,422 373 2,543 3,216 0 293 6,051 839 0 1,417 0 0 5,465 6,882 13,772
FY12F 1,600 0 1,308 5,064 143 8,114 1,514 3,723 0 643 484 14,479 865 1,627 221 2,713 3,216 0 203 6,132 1,097 0 1,417 0 0 5,832 7,250 14,479
FY13F 1,600 1,413 5,531 143 8,687 1,586 3,785 643 484 15,186 572 1,727 221 2,520 3,216 0 206 5,943 1,373 0 1,417 0 0 6,453 7,870 15,186
Notes
Group gearing to remain low with off balance sheet financing for its property projects
2.13 12.5
2.08 15.9
2.95 19.9
2.99 23.5
3.45 30.0
3.91 65.5
2.52 46.8
1.95 34.3
1.99 34.2
1.41 27.8
67.7 486.1 137.8 415.9
71.9 449.3 144.2 377.0
74.2 402.4 127.6 349.1
74.6 399.5 127.7 346.5
61.6 354.0 112.1 303.5
86
November 21, 2011
Valuation Methodology Our target price is pegged to our sum of parts valuation of SGD7.67. Our price target of SGD7.29 is derived after according a discount of 5% to the sum of parts valuation. Risks that may impede the achievement of the target price Risks to our target price: 1) changes to equity market risk premiums; 2) unexpected deterioration in the economic and physical real estate market outlook and 3) movements in the value of its listed entities.
Fig. 137: SOTP valuation
Listed companies F&N Malaysia APB Fung Choi Media Frasers Centrepoint Trust China Dairy Vinamilk Frasers Commercial Trust Other assets Times Publishing Myanmar Brewery FNN Foods Singapore Royalty income for softdrinks/dairies brands FCOT Convertible Perpetual Units Available for sale quoted investments Development properties Investment properties (including serviced residences) Property held for development (Changi) REIT Management Business Net debt/cash NAV No. of shares Intrinsic fair value per share (S$) Conglomerate discount - 5% Target Price Book value Book value per share
Stake (%) 57 40 30 43 30 10 23
Mkt Value (S$m) 1,480,776 2,652,674 23,517 474,853 37,900 96,263 111,137 4,877,120 322,467 64,525 65,882 815,833 343,000 32,700 4,351,211 2,024,493 150,000 104,070 (2,348,891) 10,802,410 1,407,634 7.67 7.29 7.29 6,321,544 4.88
Marked to market at RM17.40 per share Marked to market at S$25.90 per share Marked to market at S$0.11 per share Marked to market at S$1.45 per share To be divested for S$37.9m Marked to market at VND113000 per share NAV: based on fair value of S$0.79
Based on 5X FY12 EV/EBTIDA Book value Based on 9X FY12 EV/EBTIDA Capitalised at 10% Following sale of Alexandra Technocentre to FCOT Book value DCF of profits from landbank + Book value discounted by 20% Book value Book value 3% of REIT assets managed
87
Keppel Corp
CONGLOMERATES
KPLM.SI KEP SP
EQUITY RESEARCH
Leading offshore yard, widening product range
November 21, 2011 Rating Remains Target price Increased from 10.50 Closing price November 15, 2011 Potential upside
Earnings to hold up on replenished order book, yields remain attractive

Action: Reiterate Buy; FY11/12F earnings to be sustained by record new orders of SGD8.7bn secured to-date We believe the current share price already prices in any anticipated slowdown in new orders, given the weaker macro outlook, and given that Keppel is likely to sustain its earnings above the SGD1bn level over the next two years despite the perceived cyclicality of its offshore & marine earnings. Keppel has a net order book of SGD9bn, with deliveries going into FY14F. Reiterate Buy. Catalyst: An earlier-than-expected resumption in new orders in both the jack-up rigs and semi-submersibles rigs would be a positive We maintain that the jack-up and deepwater rig replacement cycle is intact and we believe that the current more subdued new order announcements (compared with 1H11) are likely to be temporary. As we had highlighted earlier, demand for new high-spec rigs remains robust given stricter safety requirements post the Macondo spill and given new discoveries being made. Also, offshore production units remain in good demand, which we believe should spur more conversion work. Valuation: FY12/13F P/E relatively undemanding, yields attractive We have raised FY11/12F to reflect the groups recent strong 3Q11 results as well as bookings for its Reflections at Keppel Bay project. At SGD9.30, Keppel trades at FY11/12/13F P/Es of 11x, 11x and 12x, respectively, and P\Bs of 1.9x, 1.7x and 1.6x,which are at the lower end of historical ranges (P/E range of 7-22x, P\B range of 1.5-2.5x), while dividend yields remains attractive at 4.5%. Our target price is now SGD11.10, re-based on a 5% discount (previously 10%) to our SOTP valuation, given a more positive outlook on its offshore & marine division.
Buy
SGD 11.10 SGD 9.30 +19.4%
Anchor themes While we maintain our longterm optimistic view on Singapore offshore rig builders with oil trading at well within capex-positive levels, we expect new order growth to slow over the next 6-9 months given macro trends are once again likely to disrupt the offshore rig replacement cycle in the short to medium term. Nomura vs consensus Our FY12F earnings and TP are broadly in line with consensus.
Research analysts Singapore Conglomerates Lisa Lee - NSL lisa.lee@nomura.com +65 6433 6979
9,783 1,623 1,419 79.67c 12.2 11.7 7.6 2.0 4.5 25.5 net cash
9,225 1,348 1,348 75.71c -5.0 N/A 6.8 N/A N/A 19.8 0.5
9,225 1,465 1,465 82.27c 3.3 11.3 7.7 1.9 4.5 21.3 1.1
9,036 1,137 1,137 63.81c -15.7 N/A 8.1 N/A N/A 16.1 8.1
9,626 1,500 1,500 84.21c 2.4 11.0 8.1 1.7 4.5 20.4 6.6
9,375 1,193 1,193 66.96c 4.9 N/A 7.9 N/A N/A 16.3 12.9
10,187 1,342 1,342 75.33c -10.5 12.3 8.9 1.6 4.5 17.1 10.8
Nomura | Keppel Corp
November 21, 2011
Key data on Keppel Corp

Year-end 31 Dec Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY09 12,247 -8,809 3,438 -1,934 1,505 1,679 -174 0 1,505 29 322 -38 1,817 -348 1,469 -205 0 0 1,265 361 1,625 -677 949 FY10 9,783 -6,211 3,572 -1,816 1,756 1,941 -185 0 1,756 55 215 457 2,483 -581 1,903 -484 0 0 1,419 204 1,623 -748 875 FY11F 9,225 -5,812 3,413 -1,632 1,781 1,977 -196 0 1,781 64 185 0 2,030 -368 1,662 -197 0 0 1,465 0 1,465 -748 717 FY12F 9,626 -6,294 3,331 -1,607 1,724 1,932 -208 0 1,724 65 200 0 1,990 -295 1,695 -195 0 0 1,500 0 1,500 -748 752 FY13F 10,187 -6,724 3,464 -1,903 1,561 1,781 -220 0 1,561 65 213 0 1,839 -300 1,539 -198 0 0 1,342 0 1,342 -748 594
(SGD) 13 12 11 10 9 8 7 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 125 120 115 110 105 100 95 90

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Temasek Holdings 1M 6.9 5.1 5.1 12,804.1 68.4 12.18/7.02 61.01 3M 12M -1.6 -8.2 -4.4 -3.6
1.8 11.3
21.3
Notes 13.1 15.6 10.2 4.1 7.4 2.2 7.7 8.4 28.1 13.7 12.3 13.3 19.1 41.6 3.9 2.7 30.7 12.7 11.7 13.9 10.2 4.5 17.1 2.0 7.6 8.3 36.5 19.8 18.0 16.6 23.4 46.1 9.9 5.3 25.5 12.7 11.3 13.5 11.3 4.5 8.2 1.9 7.7 8.5 37.0 21.4 19.3 15.9 18.1 51.1 8.2 3.9 21.3 11.4 11.0 13.2 11.0 4.5 10.4 1.7 8.1 8.9 34.6 20.1 17.9 15.6 14.8 49.9 7.2 3.3 20.4 10.4 12.3 14.7 12.3 4.5 10.2 1.6 8.9 10.0 34.0 17.5 15.3 13.2 16.3 55.8 7.5 3.5 17.1 8.9
Attractive dividend yield of 4.5% and robust group ROE of 20% and 17% for FY12/13F.
3.7 21.9 21.5 3.7 3.7
-20.1 15.6 16.7 12.2 12.2
-5.7 1.9 1.4 3.3 3.3
4.3 -2.3 -3.2 2.4 2.4
5.8 -7.8 -9.5 -10.5 -10.5
91.24c 71.00c 71.00c 4.31 0.38
91.12c 79.67c 79.67c 4.70 0.42
82.27c 82.27c 82.27c 4.98 0.42
84.21c 84.21c 84.21c 5.57 0.42
75.33c 75.33c 75.33c 5.82 0.42
89
November 21, 2011
Cashflow(SGDmn)
FY09 1,679 399 175 2,252 -476 1,777 -198 -633 116 31 -24 1,068 -574 0 197 0 0 -377 691 2,245 2,936 -1,177 FY10 1,941 -1,160 185 967 -973 -6 -384 -317 -382 47 -241 -1,283 -627 0 3,221 0 0 2,594 1,311 2,936 4,246 -178 FY11F 1,977 -150 196 2,023 -760 1,263 -11 -250 -134 14 -346 536 -748 0 0 0 0 -748 -212 4,246 4,034 94 FY12F 1,932 -574 234 1,591 -690 901 -418 -300 -123 14 68 143 -748 0 0 0 0 -748 -605 4,034 3,428 650 FY13F 1,781 -378 221 1,624 -760 864 -79 -300 -5 15 82 577 -748 0 0 0 0 -748 -171 3,429 3,257 1,124 Notes
Positive free cashflow generated primarily from its offshore marine and property division
Balancesheet(SGDmn)
As at 31 Dec Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY09 2,936 457 1,727 3,178 288 8,586 3,203 2,157 0 0 3,361 17,307 841 4,052 688 5,581 918 0 412 6,911 2,727 0 833 5,152 1,683 7,669 17,307
FY10 4,246 537 1,959 4,441 305 11,488 3,507 2,243 0 0 3,743 20,981 393 4,343 749 5,484 3,676 0 459 9,619 2,984 0 906 5,833 1,638 8,378 20,981
FY11F 4,034 564 2,155 4,474 305 11,531 3,491 2,793 0 0 3,877 21,693 452 4,397 773 5,622 3,676 0 473 9,771 3,044 0 906 6,088 1,884 8,878 21,693
FY12F 3,429 714 2,497 4,675 305 11,620 3,759 3,343 0 0 4,000 22,722 403 4,352 788 5,542 3,676 0 487 9,705 3,105 0 906 6,839 2,167 9,912 22,722
FY13F 3,257 750 2,872 4,841 306 12,026 3,802 3,893 0 0 4,005 23,726 411 4,447 856 5,715 3,970 0 502 10,186 3,167 0 906 7,083 2,383 10,373 23,726
Notes
Healthy balance sheet, low gearing
1.54 na
2.09 na
2.05 na
2.10 na
2.10 na
net cash net cash
net cash net cash
0.05 1.1
0.34 6.6
0.63 10.8
55.1 134.6 165.6 24.1
68.8 223.9 246.7 46.0
81.4 279.9 274.5 86.9
88.4 266.0 254.4 100.1
96.2 258.3 238.8 115.6
90
November 21, 2011
Valuation Methodology Our target price of SGD11.10 is based on a 5% discount to our sum-of-the-parts (SOTP) valuation of SGD11.70 (we also apply a similar discount for peer conglomerate Sembcorp Industries). Keppel Lands (KPLD SP) valuation is based on Nomuras target price of SGD4.90 per share and M1s (M1 SP) valuation is based on Nomura's target price of SGD3.30 per share. Risks Our target price could be hurt by a larger-than-expected fall in margins from the groups O&M division; a significant and continued fall in order book build-up; a biggerthan-expected decline in the asset values and rents at its property division; or a collapse in margins at its infrastructure division.
91
OCBC
BANKS
OCBC.SI OCBC SP
EQUITY RESEARCH
Trimming forecasts, TP; reiterate Buy
November 21, 2011 Rating Remains Target price Reduced from 11.10 Closing price November 15, 2011 Potential upside
Structural franchise attraction offsets near-term earnings drag at current discounted valuation
Action: Balanced 3Q results underscore franchise quality, value; Buy The broad P&L dynamic of strong loan growth (3Q YTD: +22%) overcoming NIM drag from sustained low interest rates is likely to continue in FY12F, in our view. But trend moderation is expected, as loan growth slows in line with decelerating regional GDP growth, while NIM stabilises with bottoming interest rates and widening corporate lending spreads. With FY11F capital market-driven insurance and trading income-related earnings declines set to stabilise in FY12F and opex showing discipline, we forecast positive FY12F earnings growth (7%) despite a doubling in credit costs to 34bps (FY11F: 17bps). Regional wealth management and insurance growth should remain key fee income drivers. Notwithstanding medium-term overhangs, ex-SGD assets (and related funding bases) are expanding and deepening, with tangible synergies between the commercial banking and wealth management platforms delivering broad revenue lift. With management execution and balance sheet trends strong, we believe OCBC has the sectors best longerterm, premium-generating growth-quality franchise balance. Catalysts: Integration gains; re-rating of GE, Bank of Ningbo stakes Integration of and tangible synergies from Bank of Singapore; market rerating of Great Eastern; raising Bank of Ningbo stake to 20% (from 14%). Valuation: TP puts OCBC at 1.5x FY12F book value, 15x earnings Earnings estimates have been trimmed to reflect sustained margin pressure from prolonged low interest rates and an anticipated rise in credit costs as economies slow. Our new SOTP-based TP (valuing GE at 1.0x embedded value, commercial bank at 1.6x book) is SGD10.70 or 1.5x FY12F book.
Buy
SGD 10.70 SGD 8.36 +28.9%
Anchor themes Incentives to diversify Singapore's economy, such as development of integrated resorts and broadening of the services/manufacturing sectors, continue to receive fiscal and monetary support, boosting demand. Nomura vs consensus We are 2% below consensus on FY12F earnings. We believe the duration of net interest margin drag, and expected uptick in credit costs may be underestimated.
Research analysts Singapore Banks Anand Pathmakanthan, CFA - NSL anand.pathmakanthan@nomura.com +65 6433 6986
PPOP (mn) Reported net profit (mn) Normalised net profit (mn) Normalised EPS Norm. EPS growth (%) Norm. P/E (x) Price/adj. book (x) Price/book (x) Dividend yield (%) ROE (%) ROA (%)
3,016 2,253 2,253 68.42c 10.5 12.4 1.5 1.3 3.6 11.3 1.1
3,202 2,287 2,287 67.96c -0.7 N/A N/A N/A N/A 10.7 0.9
3,092 2,242 2,242 66.63c -2.6 12.6 1.4 1.3 3.6 10.4 0.9
3,686 2,602 2,602 76.75c 12.9 N/A N/A N/A N/A 11.5 1.0
3,573 2,404 2,404 70.92c 6.4 11.8 1.3 1.2 3.8 10.5 0.9
4,238 2,972 2,972 87.66c 14.2 N/A N/A N/A N/A 12.2 1.0
4,012 2,704 2,704 79.75c 12.5 10.5 1.2 1.1 4.1 11.1 0.9
Nomura | OCBC
November 21, 2011
Key data on OCBC

ProfitandLoss(SGDmn)
Year-end 31 Dec Interest income Interest expense Net interest income Net fees and commissions Trading related profits Other operating revenue Non-interest income Operating income Depreciation Amortisation Operating expenses Employee share expense Op. profit before provisions Provisions for bad debt Other provision charges Operating profit Other non-operating income Associates & JCEs Pre-tax profit Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/book (x) Price/adjusted book (x) Net interest margin (%) Yield on interest earning assets (%) Cost of interest bearing liabilities (%) Net interest spread (%) Non-interest/operating income (%) Cost to income (%) Effective tax rate (%) Dividend payout (%) ROE (%) ROA (%) Operating ROE (%) Operating ROA (%) Growth (%) Net interest income Non-interest income Non-interest expenses Pre-provision earnings Net profit Normalised EPS Normalised FDEPS

FY09 4,184 -1,359 2,825 730 285 975 1,990 4,815 -58 -47 -1,737 2,972 -429 0 2,543 0 -1 2,543 -389 2,154 -192 0 0 1,962 21 1,983 -909 1,074 FY10 4,363 -1,416 2,947 994 433 951 2,378 5,325 -73 -55 -2,181 3,016 -134 0 2,882 0 -2 2,880 -433 2,447 -194 0 0 2,253 0 2,253 -1,002 1,251 FY11F 5,142 -1,742 3,400 1,122 249 819 2,190 5,590 -79 0 -2,420 3,092 -206 0 2,886 0 -2 2,884 -462 2,422 -180 0 0 2,242 0 2,242 -1,017 1,225 FY12F 6,119 -2,204 3,915 1,251 346 905 2,503 6,418 -85 0 -2,759 3,573 -488 0 3,084 0 -2 3,082 -494 2,589 -185 0 0 2,404 0 2,404 -1,085 1,319 FY13F 6,924 -2,515 4,410 1,396 434 983 2,813 7,222 -92 0 -3,118 4,012 -565 0 3,447 0 -2 3,445 -552 2,894 -190 0 0 2,704 0 2,704 -1,153 1,551
(SGD) 10.5 10 9.5 9 8.5 8 7.5 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 108 106 104 102 100 98 96 94

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Lee Family 1M 0.7 -1.1 22,153.6 70.0 10.36/7.68 36.64 3M 12M -9.2 -14.7 -5.8 0.9
-1.0 -15.3 -14.0
19.4
Notes
13.8 17.7 13.4 3.3 1.4 1.5 2.23 3.30 1.13 2.17 41.3 37.3 15.3 45.8 11.4 1.06 14.6 1.35
12.4 15.9 12.2 3.6 1.3 1.5 2.03 3.00 1.04 1.96 44.7 42.3 15.0 44.5 11.3 1.06 14.5 1.36
12.6 16.2 12.5 3.6 1.3 1.4 1.92 2.91 1.05 1.85 39.2 44.7 16.0 45.4 10.4 0.91 13.4 1.17
11.8 15.1 11.8 3.8 1.2 1.3 1.91 2.98 1.17 1.81 39.0 44.3 16.0 45.1 10.5 0.86 13.4 1.11
10.5 13.4 10.5 4.1 1.1 1.2 1.94 3.04 1.23 1.81 38.9 44.4 16.0 42.6 11.1 0.89 14.1 1.14
Net interest income growth driven by volume expansion across all loan currency segments (led by USD, +77% YTD vs total YTD loan growth of +22%), overcoming SOR/SIBORrelated margin drag. The cost-to-income ratio is elevated compared to peers on build-out costs for Bank of Singapore as well as growth opportunities in insurance and Islamic finance (including Takaful)
1.5 35.4 -3.1 26.4 32.0 28.8 25.7
4.3 19.5 25.5 1.5 14.8 10.5 11.5
15.4 -7.9 10.9 2.5 -0.5 -2.6 -1.9
15.1 14.3 14.0 15.6 7.2 6.4 7.2
12.6 12.4 13.0 12.3 12.5 12.5 12.5
93
Nomura | OCBC
November 21, 2011
BalanceSheet(SGDmn)
As at 31 Dec Cash and equivalents Inter-bank lending Deposits with central bank Total securities Other interest earning assets Gross loans Less provisions Net loans Long-term investments Fixed assets Goodwill Other intangible assets Other non IEAs Total assets Customer deposits Bank deposits, CDs, debentures Other interest bearing liabilities Total interest bearing liabilities Non interest bearing liabilities Total liabilities Minority interest Common stock Preferred stock Retained earnings Reserves for credit losses Proposed dividends Other equity Shareholders' equity Total liabilities and equity Non-performing assets (SGD) Balance sheet ratios (%) Loans to deposits Equity to assets Asset quality & capital NPAs/gross loans (%) Bad debt charge/gross loans (%) Loss reserves/assets (%) Loss reserves/NPAs (%) Tier 1 capital ratio (%) Total capital ratio (%) Growth (%) Loan growth Interest earning assets Interest bearing liabilities Asset growth Deposit growth Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) DPS (SGD) PPOP PS (SGD) BVPS (SGD) ABVPS (SGD) NTAPS (SGD)
FY09 7,244 15,821 5,927 28,166 0 82,341 -1,465 80,876 7,453 2,374 3,362 0 43,077 194,300 100,633 14,877 6,863 122,373 50,148 172,521 2,808 6,210 1,166 9,103 0 2,492 18,971 194,300 1,384 FY10 6,321 18,569 5,172 31,357 0 106,449 -1,460 104,989 9,035 2,358 3,996 0 47,486 229,283 123,300 21,070 6,853 151,224 54,414 205,638 2,855 7,045 1,166 10,592 0 1,987 20,790 229,283 995 FY11F 5,872 20,426 4,805 35,918 0 134,126 -1,661 132,465 9,757 2,338 3,996 0 49,385 264,963 150,559 21,618 6,853 179,030 60,544 239,574 3,035 7,437 1,166 11,764 0 1,987 22,354 264,963 816 FY12F 6,666 22,469 5,454 40,878 0 150,221 -1,872 148,349 10,538 2,318 3,996 0 51,361 292,029 168,774 22,129 6,854 197,758 67,405 265,163 3,219 7,437 1,166 13,057 0 1,987 23,647 292,029 979 FY13F 4,796 24,716 3,924 45,975 0 165,243 -2,072 163,171 11,381 2,298 3,996 0 53,415 313,673 186,222 22,691 1,094 210,007 75,085 285,092 3,409 7,437 1,166 14,581 0 1,987 25,171 313,673 1,273 Notes
Notwithstanding some modest dilution over the past two quarters, CASA share had shown consistent growth since 1Q08, now near a record 47.6% (vs. 28% in FY06; overtook UOB in 2Q10)
81.8 9.8
86.3 9.1
89.1 8.4
89.0 8.1
88.7 8.0
1.7 0.52 0.75 105.9 16.0 16.5
0.9 0.13 0.64 146.7 16.3 17.6
0.6 0.15 0.63 203.6 14.9 16.4
0.7 0.33 0.64 191.2 14.3 15.9
0.8 0.34 0.66 162.8 14.4 16.1
Credit costs are the lowest in the sector, reflecting strong credit risk management history and tight lending footprint (primarily ASEAN-centric) Capital ratios have been relatively resilient despite rapid asset growth, underpinned by the scrip dividend scheme (>80% rate of acceptance) and relatively moderate risk-weighted asset (RWA) growth
1.3 6.8 3.8 7.1 7.0
29.8 22.4 23.6 18.0 22.5
26.2 20.9 18.4 15.6 22.1
12.0 12.2 10.5 10.2 12.1
10.0 9.5 6.2 7.4 10.3
62.59c 61.93c 60.46c 0.28 0.94 5.85 5.72 4.81
68.42c 68.42c 67.44c 0.30 0.92 6.22 5.65 5.03
66.63c 66.63c 66.14c 0.30 0.92 6.59 5.98 5.42
70.92c 70.92c 70.92c 0.32 1.05 6.98 6.37 5.80
79.75c 79.75c 79.75c 0.34 1.18 7.43 6.82 6.25
94
Nomura | OCBC
November 21, 2011
Valuation methodology: Reflecting our reduced earnings forecasts as a result of sustained margin pressure from prolonged low interest rates and anticipated increase in credit costs as economies slow, our new sum-of-the-parts based TP (methodology unchanged: valuing GE at 1.0x embedded value, and commercial bank at 1.6x book) is SGD10.70 or 1.5x FY12F book. Key risks: We believe weak execution in integrating the various operating platforms could impact profitability and asset quality.
95
Olam International
AGRI-RELATED
OLAM.SI OLAM SP
EQUITY RESEARCH
USD1bn PAT guidance (by 2016), sans dilution
Diversified business model does well in volatile macro; we maintain Olam as our top pick
Action: Olam to raise USD600mn; reiterate Buy on strong guidance Olam announced a capital raising of USD600mn, divided into three tranches USD200mn each as placement shares (already subscribed), preferential shares (for pre-placement shareholders) and to Temasek. Potential dilution has been an overhang on the stock for the past few months, and we think the market will now start focusing on core earnings delivery, which has been strong. Guidance of USD1bn PAT by 2016F, without further dilution A key positive was new guidance of USD1bn earnings by 2016F, and as per management, Olam should not need to dilute to achieve this target. Although our estimates look muted compared with guidance, we do believe Olam now has enough war chest to fund ~SGD2.5bn in new capex without risk of further dilution (excluding equity for committed capex). Operating cash flow, however, is expected to turn positive only by 2014 (in line with our estimate). Valuation: Trading at ~14x CY12F P/E, potential to re-rate from here We maintain Olam as our top pick in the agri space on significant implied earnings growth and its diversified and niche market business, which lends an advantage in these markets. Valuation looks attractive given a 27% FY11-14F earnings CAGR (and 32% CAGR if it were to hit its USD1bn PAT target by 2016F). Catalysts: Earnings momentum, asset investments, urea project We estimate the Gabon project to be highly value accretive. While the Street may treat bio gains as non-core for now, we think the corresponding physical assets should contribute to operating earnings in 1-2 years, leading to higher implied growth later. Similarly, a foray into sugar would be a big positive, in our view.
30 Jun Currency (SGD) FY11 Actual Old FY12F New Old FY13F New Old FY14F New
Buy
SGD 3.50 SGD 2.44 +43.4%
Anchor themes Demand for reliable and quality supply chain manager asset class is increasing, as supply concerns mount and demand and food inflation remain strong. Nomura vs consensus Our target price is 5% higher than the Streets as we build in PV of long-term investments like the Gabon fertilizer project, which is significantly valueaccretive, in our view.
Research analysts ASEAN Agri-Related Tanuj Shori - NIHK tanuj.shori@nomura.com +852 2252 1407 Tushar Mohata - NSFSPL tushar.mohata@nomura.com +91 22 6723 4042 Vishnuvardana Reddy - NSFSPL vishnuvardana.reddy@nomura.com +91 22 3053 2847
15,951 430 373 17.58c 29.7 15.8 12.3 2.3 2.0 21.4 254.2
19,071 396 396 17.69c 0.7 N/A 9.8 N/A N/A 15.0 188.0
19,071 396 396 17.69c 0.7 16.0 9.8 1.9 1.7 15.0 188.0
21,210 511 511 21.46c 21.3 N/A 8.7 N/A N/A 15.8 188.7
21,210 511 511 21.46c 21.3 13.2 8.7 1.7 2.2 15.8 188.7
23,001 630 630 26.47c 23.3 N/A 7.5 N/A N/A 17.2 161.7
23,001 630 630 26.47c 23.3 10.7 7.5 1.5 2.7 17.2 161.7
Nomura | Olam International
November 21, 2011
Key data on Olam International

Year-end 30 Jun Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY10 10,609 -8,466 2,143 -1,596 547 616 -69 547 -227 13 87 420 -60 360 0 -87 272 87 359 -94 265 FY11 15,951 -13,127 2,825 -2,055 769 861 -91 769 -344 28 57 510 -66 445 -15 -57 373 57 430 -105 325 FY12F 19,071 -15,762 3,309 -2,347 962 1,084 -122 962 -525 34 0 471 -61 410 -14 0 396 396 -99 297 FY13F 21,210 -17,530 3,680 -2,546 1,134 1,297 -163 1,134 -566 41 0 608 -79 529 -18 0 511 511 -128 383 FY14F 23,001 -19,011 3,991 -2,723 1,267 1,485 -218 1,267 -566 49 0 750 -97 652 -22 0 630 630 -158 473
(SGD) 3.4 3.2 3 2.8 2.6 2.4 2.2 2 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 105 100 95 90 85 80

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Kewalram Singapore Ltd Temasek Holdings 1M 0.4 -1.3 -2.3 4,025.9 57.0 3.29/2.06 23.11 3M 12M 0.0 -23.1 -6.7 -22.4 2.6 -8.2
18.8 16.0
20.8 29.8 13.6 1.8 na 2.9 14.4 16.1 20.2 5.8 5.2 3.4 14.4 26.2 1.7 2.7 25.5 9.3
15.8 22.7 12.0 2.0 na 2.3 12.3 13.7 17.7 5.4 4.8 2.7 12.9 24.4 2.3 3.9 21.4 8.5
16.0 22.9 13.8 1.7 73.8 1.9 9.8 11.0 17.3 5.7 5.0 2.1 13.0 25.0 5.2 8.2 15.0 8.2
13.2 18.9 11.4 2.2 na 1.7 8.7 9.9 17.3 6.1 5.3 2.4 13.0 25.0 2.8 3.7 15.8 8.9
10.7 15.4 9.2 2.7 11.3 1.5 7.5 8.7 17.3 6.5 5.5 2.7 13.0 25.0 1.3 1.4 17.2 9.3
Notes
Net margin expansion in line with management guidance
22.6 44.3 41.7 27.5 16.0
50.4 39.8 40.6 29.7 31.3
19.6 25.9 25.0 0.7 -0.9
11.2 19.6 17.9 21.3 20.9
8.4 14.5 11.8 23.3 23.3
17.91c 13.55c 11.74c 0.85 0.05
20.27c 17.58c 15.41c 1.07 0.05
17.69c 17.69c 15.27c 1.28 0.04
21.46c 21.46c 18.47c 1.44 0.05
26.47c 26.47c 22.78c 1.64 0.07
97
Nomura | Olam International
November 21, 2011
Cashflow(SGDmn)
Year-end 30 Jun EBITDA Change in working capital Other operating cashflow Cashflow from operations Capital expenditure Free cashflow Reduction in investments Net acquisitions Reduction in other LT assets Addition in other LT liabilities Adjustments Cashflow after investing acts Cash dividends Equity issue Debt issue Convertible debt issue Others Cashflow from financial acts Net cashflow Beginning cash Ending cash Ending net debt
FY10 616 -1,010 -460 -854 -182 -1,036 -85 17 -67 -504 -1,674 -94 448 1,329 685 -556 1,812 138 534 672 3,831 FY11 861 -1,597 -887 -1,623 -361 -1,984 74 16 -48 -582 -2,524 -105 281 2,298 0 250 2,724 201 672 872 5,708 FY12F 1,084 -412 -586 86 -1,000 -914 0 0 0 945 30 -99 498 500 0 -437 462 492 872 1,365 5,716 FY13F 1,297 -720 -645 -69 -600 -669 0 0 0 50 -618 -128 0 0 0 0 -128 -746 1,365 619 6,462 FY14F 1,485 -221 -664 600 -300 300 0 0 0 19 319 -158 0 0 0 0 -158 162 619 780 6,300 Notes
Negative free cashflow expected in FY11-12F due to high capex required
Balancesheet(SGDmn)
As at 30 Jun Cash & equivalents Marketable securities Accounts receivable Inventories Other current assets Total current assets LT investments Fixed assets Goodwill Other intangible assets Other LT assets Total assets Short-term debt Accounts payable Other current liabilities Total current liabilities Long-term debt Convertible debt Other LT liabilities Total liabilities Minority interest Preferred stock Common stock Retained earnings Proposed dividends Other equity and reserves Total shareholders' equity Total equity & liabilities Liquidity (x) Current ratio Interest cover Leverage Net debt/EBITDA (x) Net debt/equity (%) Activity (days) Days receivable Days inventory Days payable Cash cycle
FY10 672 977 2,538 1,492 5,678 486 1,236 331 69 7,799 2,282 660 737 3,678 1,491 730 130 6,029 -1 1,202 809 -239 1,772 7,799
FY11 872 1,595 3,584 3,548 9,599 412 2,030 486 53 12,580 3,610 1,096 2,424 7,130 2,431 540 177 10,278 57 1,577 1,186 -518 2,245 12,580
FY12F 1,365 1,567 3,767 3,819 10,518 412 2,434 486 53 13,903 4,110 1,012 2,522 7,644 2,431 540 177 10,792 71 2,075 1,483 -518 3,041 13,903
FY13F 619 1,950 4,409 3,773 10,750 412 2,861 486 53 14,563 4,110 1,332 2,460 7,903 2,431 540 177 11,050 88 2,075 1,867 -518 3,424 14,563
FY14F 780 1,864 4,457 4,000 11,102 412 2,974 486 53 15,027 4,110 1,210 2,552 7,872 2,431 540 177 11,020 110 2,075 2,339 -518 3,897 15,027
Notes
Leverage levels expected to come down over the coming years
1.54 2.4
1.35 2.2
1.38 1.8
1.36 2.0
1.41 2.2
6.22 216.2
6.63 254.2
5.27 188.0
4.98 188.7
4.24 161.7
29.4 97.1 28.4 98.1
29.4 85.1 24.4 90.1
30.3 85.3 24.5 91.2
30.3 85.1 24.4 91.0
30.3 85.1 24.4 91.0
98
SATS
SATS.SI SATS SP
CONSUMER RELATED
EQUITY RESEARCH
Beyond Daniels, a better Japan & yield support
Feeding and moving Asias flyers

Action: Moving past Daniels and into Japan improvement in 2012 2012F should see SATS moving ahead post the Daniels sale and see Japans TFK slowly improving after swinging into the black in 2QFY12, diminishing most of the 2010 overhang for the stock. While cargo is likely to stay weak, the removal of the top line drag from Daniels, a sequential improvement in Japan and the (if successful) foray into new revenue streams should underpin earnings, in our view. Potential for dividend upside to our and consensus payout forecast of 60% (historical: 74-78%) exists should SATS not make any major acquisitions, with increased cash balance post the Daniels sale. Catalyst: Decision on cruise terminal, Daniels sale removes opportunity costs for other expansions, pure Asia exposure now We think the share price has adjusted for the entry of a third ground handler at Changi and the unfortunate timing of the TFK acquisition in Japan prior to the earthquake. The Daniels sale eliminates an opportunity cost for further expansions, and leaves SATS exposure entirely in Asia, with the highest Asia exposure among peers. Similar to peers in mature markets, SATS growth could also entail expansions into new revenue streams, we believe, which it is pursuing with its Marina cruise terminal bid, and potentially in rail as transport infrastructure in the region grows. Valuation: Calendarized P/E of 12.4x CY12F for solid dividend yield Our residual income model imputes a long-term ROE of 11.5% at a terminal growth rate of 2%, implying a one-year forward target P/E of 16.5x. We think a P/E-based target undervalues the associates long-term potential, while it continues to offer one of the highest dividend yields among global peers.
31 Mar Currency (SGD) FY11 Actual Old FY12F New Old FY13F New Old FY14F New
Buy
SGD 3.16 SGD 2.37 +33.3%
Anchor themes Post Daniels disposal, SATS' pure Asia and regional hubs presence gives it attractive exposure to the regions expected long-term robust intraregion travel growth rates, supported by decent yields. Nomura vs consensus Our FY12F normalized net profit estimate of SGD180mn is slightly below the consensus estimate of SGD185mn.
Research analysts Singapore Transport/Logistics Jacinda Loh - NSM jacinda.loh@nomura.com +60 3 2027 6889 Raashi Gupta - NSFSPL raashi.gupta@nomura.com +91 22 4053 3779
1,729 191 192 17.33c 12.8 13.7 7.1 1.7 7.2 12.7
1,759 182 180 16.27c -6.1 N/A 6.7 N/A N/A 11.7
1,759 182 180 16.27c -6.1 14.6 6.7 1.6 4.1 11.7
1,897 224 222 20.08c 23.4 N/A 5.6 N/A N/A 13.7
1,897 224 222 20.08c 23.4 11.8 5.6 1.6 5.1 13.7
2,047 254 253 22.79c 13.5 N/A 4.8 N/A N/A 14.6
2,047 254 253 22.79c 13.5 10.4 4.9 1.4 5.9 14.6
net cash net cash net cash net cash net cash net cash net cash
Nomura | SATS
November 21, 2011
Key data on SATS

Year-end 31 Mar Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY10 1,539 -410 1,129 -400 -545 184 275 -91 184 -5 42 1 223 -41 182 -1 -13 168 13 181 -144 37 FY11 1,729 -475 1,255 -423 -647 185 281 -96 185 -2 61 2 246 -54 192 0 1 192 -1 191 -188 3 FY12F 1,759 -490 1,269 -447 -675 147 264 -117 147 0 79 2 228 -46 182 0 -2 180 2 182 -108 74 FY13F 1,897 -533 1,364 -461 -715 188 297 -110 188 0 91 2 281 -56 225 0 -2 222 2 224 -133 91 FY14F 2,047 -590 1,458 -477 -768 212 315 -103 212 0 104 2 318 -64 255 0 -2 253 2 254 -152 103
(SGD) 3 2.8 2.6 2.4 2.2 2 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 Price Rel MSCI Singapore 105 100 95 90 85 80

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Temasek Holdings 1M 4.1 1,978.2 55.7 2.9/2.04 1.70 3M 12M 5.8 -15.8 -1.7
5.8 13.4 -16.5 3.1 16.0
44.3
Notes 15.6 20.9 14.3 5.5 10.3 1.8 7.5 10.5 73.4 17.9 12.0 11.8 18.3 79.5 4.2 0.7 12.6 12.5 13.7 18.2 13.7 7.2 13.3 1.7 7.1 9.9 72.6 16.2 10.7 11.1 21.9 98.4 4.0 0.7 12.7 13.2 14.6 19.4 14.4 4.1 11.9 1.6 6.7 10.2 72.1 15.0 8.3 10.3 20.0 59.4 4.0 0.6 11.7 11.4 11.8 15.7 11.7 5.1 11.1 1.6 5.6 7.9 71.9 15.7 9.9 11.8 20.0 59.6 3.7 0.6 13.7 14.3 10.4 13.9 10.3 5.9 10.5 1.4 4.9 6.5 71.2 15.4 10.4 12.4 20.0 59.6 3.4 0.7 14.6 16.3
Current 60% payout assumptions could turn out to be conservative, implying potential for higher yield
44.9 16.9 7.9 15.7 14.2
12.4 2.0 0.1 12.8 14.3
1.7 -6.0 -20.5 -6.1 -6.1
7.8 12.7 28.0 23.4 23.4
7.9 6.0 12.9 13.5 13.5
16.58c 15.37c 15.16c 1.34 0.13
17.28c 17.33c 17.33c 1.37 0.17
16.43c 16.27c 16.27c 1.44 0.10
20.23c 20.08c 20.08c 1.52 0.12
22.94c 22.79c 22.79c 1.66 0.14
100
Nomura | SATS
November 21, 2011
Cashflow(SGDmn)
FY10 275 157 -178 254 -64 190 20 0 0 -3 32 240 -119 33 -226 131 -180 59 137 196 -172 FY11 281 -28 -56 197 -70 127 0 -104 -32 56 64 110 -188 37 160 -11 -2 107 196 304 -119 FY12F 264 3 -46 221 -70 151 0 0 0 0 81 233 -108 0 0 0 -109 124 304 428 -244 FY13F 297 -5 -56 236 -70 166 0 0 0 0 93 259 -133 0 0 0 -134 125 428 553 -369 FY14F 315 -2 -64 249 -70 179 0 0 0 0 106 285 -152 0 0 0 -152 134 553 687 -502 Notes
Still see its strong free cash flow position continuing
Balancesheet(SGDmn)
FY10 196 0 219 43 27 486 8 594 242 220 359 1,909 14 155 108 277 10 122 409 18 288 1,224 -31 1,482 1,909
FY11 304 0 285 59 40 688 8 732 253 236 391 2,308 164 200 130 494 21 177 692 95 325 1,272 -76 1,521 2,308
FY12F 428 0 289 61 30 808 8 685 253 236 391 2,382 164 207 123 493 21 177 691 95 325 1,346 -76 1,595 2,382
FY13F 553 0 312 67 31 963 8 645 253 236 391 2,497 164 225 129 518 21 177 716 95 325 1,437 -76 1,686 2,497
FY14F 687 0 337 74 32 1,129 8 612 253 236 391 2,630 164 248 136 548 21 177 746 95 325 1,540 -76 1,788 2,630
Notes
Cash pile in FY12F to be boosted by the Daniels sale, which supports expansion opportunities
1.75 39.2
1.39 80.2
1.64 na
1.86 na
2.06 na
net cash net cash
net cash net cash
net cash net cash
net cash net cash
net cash net cash
40.7 44.4 130.0 -44.9
53.2 39.4 136.4 -43.8
59.7 45.1 151.8 -47.0
57.9 43.9 147.7 -45.9
57.9 43.5 146.4 -45.1
101
Singapore Telecom
TELECOMS
STEL.SI ST SP
EQUITY RESEARCH
2012 could be choppy again
Too big, too diversified and too complex even.but cash is stable
Action/ Valn: Getting big and complex, but cash is cash. Neutral We don't dismiss the complexities in understanding and analysing SingTel, especially now as its core business in Singapore and Australia are transitioning through the NBN rollout, which could change its earnings profile. Moreover, its regional Associates like Bharti and their subsequent investments in 17 African countries makes earnings projections difficult both on the underlying basis and due to the FX. Nevertheless, one stable element of SingTel has always been its freecashflows, which we think will remain in excess of SGD3bn for the next few years, and will continue to support the share price in volatile markets. Management has a strong history of capital returns, provided credit markets are stable and there are no acquisitions on the horizon. We expect this to continue. The stock is now trading at 13.5x FY13F. Catalyst: Some concerns about Optus and Telkomsel rest stable The operating conditions for Optus could become more challenging especially as Telstra and VHA remain aggressive. Optus may not lose ground, but scope for positive earnings surprises will also be limited. Recent 2Q12 results showed a sharp slowdown in revenue/EBITDA trends to 1% growth each. This, along with uncertainties over Telkomsel stake restructuring, could keep a lid on the share price. Otherwise, its Singapore business continues to surpass expectations and is adding share across most segments we expect this trend to continue into 2012. Bhartis underlying operations have stabilized too as competitive intensity moderates, although regulations could be a risk. Other operations in Thailand and the Philippines are also exceeding expectations.
30 Mar Currency (SGD) FY11 Actual Old FY12F New Old FY13F New Old FY14F New
Neutral
SGD 3.40 SGD 3.21 +5.9%
Anchor themes Volatility, due to rising competition in regional markets, could persist, but SingTels associates have strong market positions, balance sheets and earnings outlook. Nomura vs consensus Our target price is broadly in line with consensus.
Research analysts ASEAN Telecoms Sachin Gupta, CFA - NSL sachin.gupta@nomura.com +65 6433 6968 Neeraja Natarajan - NSL neeraja.natarajan@nomura.com +65 6433 6961 Pankaj Suri - NSFSPL pankaj.suri@nomura.com +91 22 4053 3724 Gopakumar Pullaikodi - NSFSPL gopakumar.pullaikodi@nomura.com +91 22 4053 3733
18,201 3,825 3,809 23.85c -2.7 13.5 7.6 2.1 8.0 16.0 18.4
17,990 3,633 3,633 22.75c -4.6 N/A 7.9 N/A N/A 15.1 25.0
17,990 3,633 3,633 22.75c -4.6 14.1 8.0 2.2 5.0 15.1 25.0
18,433 3,803 3,803 23.81c 4.7 N/A 7.5 N/A N/A 15.5 21.8
18,433 3,803 3,803 23.81c 4.7 13.5 7.6 2.0 5.6 15.5 21.8
18,818 3,945 3,945 24.71c 3.8 N/A 7.2 N/A N/A 15.4 20.3
18,818 3,945 3,945 24.71c 3.8 13.0 7.3 2.2 5.3 15.4 20.3
Nomura | Singapore Telecom
November 21, 2011
Key data on Singapore Telecom

Year-end 30 Mar Revenue Cost of goods sold Gross profit SG&A Employee share expense Operating profit EBITDA Depreciation Amortisation EBIT Net interest expense Associates & JCEs Other income Earnings before tax Income tax Net profit after tax Minority interests Other items Preferred dividends Normalised NPAT Extraordinary items Reported NPAT Dividends Transfer to reserves Valuation and ratio analysis FD normalised P/E (x) FD normalised P/E at price target (x) Reported P/E (x) Dividend yield (%) Price/cashflow (x) Price/book (x) EV/EBITDA (x) EV/EBIT (x) Gross margin (%) EBITDA margin (%) EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout (%) Capex to sales (%) Capex to depreciation (x) ROE (%) ROA (pretax %) Growth (%) Revenue EBITDA EBIT Normalised EPS Normalised FDEPS Per share Reported EPS (SGD) Norm EPS (SGD) Fully diluted norm EPS (SGD) Book value per share (SGD) DPS (SGD)

FY10 16,966 -2,797 14,169 -11,199 2,409 5,379 7,257 -1,827 -51 5,379 -334 0 -3 5,042 -1,136 3,906 1 8 0 3,915 -8 3,907 -2,268 1,639 FY11 18,201 -2,961 15,240 -12,090 2,141 5,291 7,260 -1,918 -51 5,291 -324 0 25 4,992 -1,170 3,822 3 -16 0 3,809 16 3,825 -4,120 -295 FY12F 17,990 -3,034 14,956 -12,071 2,112 4,997 7,078 -2,030 -51 4,997 -225 0 0 4,773 -1,142 3,630 3 0 0 3,633 0 3,633 -2,555 1,078 FY13F 18,433 -3,071 15,362 -12,439 2,383 5,305 7,407 -2,050 -51 5,305 -301 0 0 5,004 -1,205 3,800 3 0 0 3,803 0 3,803 -2,875 928 FY14F 18,818 -3,190 15,628 -12,724 2,568 5,473 7,607 -2,084 -51 5,473 -276 0 0 5,196 -1,254 3,942 3 0 0 3,945 0 3,945 -3,034 911
(SGD) 3.6 3.4 3.2 110 3 2.8 A ug 11 S ep 11 M ay 11 F eb 11 J an 11 D ec 10 M ar 11 J un 11 N ov 11 O c t 11 A pr 11 J ul 11 100 90 Price Rel MSCI Singapore 140 130 120

(%) Absolute (SGD) Absolute (USD) Relative to index Market cap (USDmn) Estimated free float (%) 52-week range (SGD) 3-mth avg daily turnover (USDmn) Major shareholders (%) Temasek Capital Group 1M 1.3 -0.4 -1.5 39,636.4 45.8 3.3/2.75 61.03 3M 12M 5.6 -1.4 -1.5 -0.7
8.2 13.4
54.1 4.9
13.1 14.2 13.1 4.4 9.6 2.2 7.7 10.4 83.5 42.8 31.7 23.0 22.5 58.0 11.5 1.1 17.8 15.7
13.5 14.6 13.4 8.0 8.5 2.1 7.6 10.4 83.7 39.9 29.1 21.0 23.4 107.7 11.2 1.1 16.0 14.5
14.1 15.3 14.1 5.0 9.4 2.2 8.0 11.3 83.1 39.3 27.8 20.2 23.9 70.3 12.7 1.1 15.1 13.6
13.5 14.6 13.5 5.6 9.1 2.0 7.6 10.6 83.3 40.2 28.8 20.6 24.1 75.6 12.5 1.1 15.5 14.2
13.0 14.1 13.0 5.3 9.2 2.2 7.3 10.2 83.1 40.4 29.1 21.0 24.1 76.9 12.1 1.1 15.4 14.3
Notes
Moderating growth rates
12.9 12.0 9.8 9.8
7.3 0.0 -2.7 -2.7
-1.2 -2.5 -4.6 -4.6
2.5 4.6 4.7 4.7
2.1 2.7 3.8 3.8
24.47c 24.52c 24.52c 1.47 0.14
23.95c 23.85c 23.85c 1.52 0.26
22.75c 22.75c 22.75c 1.49 0.16
23.81c 23.81c 23.81c 1.57 0.18
24.71c 24.71c 24.71c 1.47 0.17
103
November 21, 2011
Cashflow(SGDmn)
FY10 7,257 823 -2,751 5,329 -1,952 3,377 -9 -90 21 0 -150 3,150 -2,085 -54 -204 0 -270 -2,613 537 1,076 1,613 5,227 FY11 7,260 260 -1,477 6,043 -2,033 4,010 -53 -668 24 0 -47 3,266 -2,358 -32 815 0 -567 -2,142 1,124 1,614 2,738 4,479 FY12F 7,078 92 -1,713 5,457 -2,287 3,170 0 -300 0 0 0 2,870 -4,120 0 500 0 -225 -3,845 -975 2,738 1,763 5,954 FY13F 7,407 48 -1,827 5,628 -2,296 3,332 0 0 0 0 0 3,332 -2,555 0 0 0 -301 -2,856 475 1,763 2,238 5,479 FY14F 7,607 59 -2,064 5,602 -2,272 3,330 0 0 0 0 3,330 -2,875 0 0 0 -276 -3,151 179 2,238 2,418 5,299 Notes
FCF Outlook remains strong
Balancesheet(SGDmn)
FY10 1,614 0 3,172 346 13 5,144 256 10,750 9,561 639 11,601 37,952 1,513 4,650 672 6,835 5,328 0 2,273 14,436 23 0 2,616 20,877 0 0 23,493 37,952
FY11 2,738 0 3,449 299 69 6,555 309 11,113 9,561 657 11,087 39,282 2,673 4,450 1,418 8,541 4,544 0 1,847 14,932 22 0 2,623 21,705 0 0 24,328 39,282
FY12F 1,763 0 3,409 296 68 5,535 309 10,625 9,561 606 11,911 38,547 2,673 4,389 1,526 8,588 5,044 0 1,055 14,687 19 0 2,623 21,218 0 0 23,841 38,547
FY13F 2,238 0 3,493 303 70 6,104 309 10,872 9,561 555 12,596 39,996 2,673 4,482 1,575 8,730 5,044 0 1,118 14,892 16 0 2,623 22,466 0 0 25,089 39,996
FY14F 2,418 0 3,567 309 71 6,365 309 11,060 9,561 503 13,480 41,278 2,673 4,568 1,630 8,870 5,044 0 1,192 15,106 13 0 2,623 23,536 0 0 26,159 41,278
Notes
Strong balance sheet bodes well for ongoing capital management
0.75 16.1
0.77 16.3
0.64 22.2
0.70 17.6
0.72 19.8
0.72 22.25
0.62 18.41
0.84 24.97
0.74 21.84
0.70 20.26
61.4 33.9 516.7 -421.4
66.4 39.7 560.8 -454.7
69.8 35.9 533.2 -427.5
68.3 35.6 527.2 -423.3
68.5 35.0 517.8 -414.3
104
November 21, 2011
Valuation Methodology Our target price of SGD3.40 is based on our DCF sum-of-the-parts model. We use an average discount rate (WACC) of 8.32% for the Singapore and Optus businesses, with a terminal growth rate of 1.5%. Our discount rates for its associates are 10-12%, with terminal growth rates ranging from 2% to 4%. The cash flows are discounted back to FY15F. Risks More aggressive competition in Singapore and Australia, a macro slowdown, further appreciation of the Singapore dollar and slowing growth at associates.
105
November 21, 2011
106
November 21, 2011
107
November 21, 2011
108
November 21, 2011
Appendix A-1
Analyst Certification
I, Jit Soon Lim, hereby certify (1) that the views expressed in this Research report accurately reflect my personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of my compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures

Mentioned companies
Issuer name Biosensors International CapitaCommercial Trust ComfortDelGro Corp CapitaMalls Asia Fraser and Neave Keppel Corp OCBC Olam International SATS Singapore Telecom Ticker BIG SP CCT SP CD SP CMA SP FNN SP KEP SP OCBC SP OLAM SP SATS SP ST SP Price SGD 1.32 SGD 1.09 SGD 1.40 SGD 1.34 SGD 6.22 SGD 9.00 SGD 8.15 SGD 2.26 SGD 2.37 SGD 3.12 Price date 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 18-Nov-2011 Stock rating Buy Buy Buy Buy Buy Buy Buy Buy Buy Neutral Sector rating Not rated Not rated Not rated Not rated Not rated Not rated Not rated Not rated Not rated Not rated Disclosures
10
4,49
Disclosures required in the U.S.

49 Possible IB related compensation in the next 3 months Nomura Securities International, Inc. and/or its affiliates expects to receive or intends to seek compensation for investment banking services from the company in the next three months.
Disclosures required in the European Union

4 Market maker Nomura International plc or an affiliate in the global Nomura group is a market maker or liquidity provider in the securities / related derivatives of the issuer. Board appointments and other business interests An employee of Nomura International plc or its affiliates in the global Nomura group has an interest in the issuer.
10
Previous Rating
Issuer name Biosensors International CapitaCommercial Trust ComfortDelGro Corp CapitaMalls Asia Fraser and Neave Keppel Corp OCBC Olam International SATS Singapore Telecom Previous Rating Not Rated Strong Buy Neutral Neutral Reduce Neutral Neutral Neutral Not Rated Buy Date of change 16-Oct-2009 03-Dec-2008 21-Jan-2011 12-Jan-2011 04-Mar-2010 03-Jul-2009 19-May-2009 18-Nov-2010 14-Dec-2009 12-Nov-2010
Rating and target price changes

Ticker Old stock rating New stock rating Old target price New target price
Keppel Corp OCBC
KEP SP OCBC SP
Buy Buy
Buy Buy
SGD 10.50 SGD 11.10
SGD 11.10 SGD 10.70
109
November 21, 2011
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Distribution of ratings (US)

The distribution of all ratings published by Nomura US Equity Research is as follows: 39% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 8% of companies with this rating are investment banking clients of the Nomura Group*. 54% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 3% of companies with this rating are investment banking clients of the Nomura Group*. 7% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 0% of companies with this rating are investment banking clients of the Nomura Group*. As at 30 September 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.
Distribution of ratings (Global)

The distribution of all ratings published by Nomura Global Equity Research is as follows: 49% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 41% of companies with this rating are investment banking clients of the Nomura Group*. 41% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; 50% of companies with this rating are investment banking clients of the Nomura Group*. 10% have been assigned a Reduce rating which, for purposes of mandatory disclosures, are classified as a Sell rating; 20% of companies with this rating are investment banking clients of the Nomura Group*. As at 30 September 2011. *The Nomura Group as defined in the Disclaimer section at the end of this report.
Explanation of Nomura's equity research rating system in Europe, Middle East and Africa, US and Latin America
The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock. Analysts may also indicate absolute upside to target price defined as (fair value - current price)/current price, subject to limited management discretion. In most cases, the fair value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as discounted cash flow or multiple analysis, etc. STOCKS A rating of 'Buy', indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of 'Neutral', indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of 'Suspended', indicates that the rating, target price and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including, but not limited to, when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the company. Benchmarks are as follows: United States/Europe: Please see valuation methodologies for explanations of relevant benchmarks for stocks (accessible through the left hand side of the Nomura Disclosure web page: http://go.nomuranow.com/research/globalresearchportal);Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia, unless otherwise stated in the valuation methodology. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next 12 months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months. Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging Markets ex-Asia.
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November 21, 2011
Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from 30 October 2008 and in Japan from 6 January 2009
STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price, subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock, based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc. A 'Buy' recommendation indicates that potential upside is 15% or more. A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%. A 'Reduce' recommendation indicates that potential downside is 5% or more. A rating of 'Suspended' indicates that the rating and target price have been suspended temporarily to comply with applicable regulations and/or firm policies in certain circumstances including when Nomura is acting in an advisory capacity in a merger or strategic transaction involving the subject company. Securities and/or companies that are labelled as 'Not rated' or shown as 'No rating' are not in regular research coverage of the Nomura entity identified in the top banner. Investors should not expect continuing or additional information from Nomura relating to such securities and/or companies. SECTORS A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive absolute recommendation. A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral absolute recommendation. A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative absolute recommendation.
Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009
STOCKS A rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six months. A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over the next six months. A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over the next six months. A rating of '5' or 'Sell', indicates that the analyst expects the stock to underperform the Benchmark by 15% or more over the next six months. Stocks labeled 'Not rated' or shown as 'No rating' are not in Nomura's regular research coverage. Nomura might not publish additional research reports concerning this company, and it undertakes no obligation to update the analysis, estimates, projections, conclusions or other information contained herein. SECTORS A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months. A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months. A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months. Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe; Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.
Target Price
A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.
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November 21, 2011
Disclaimers
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This material is: (i) for your private information, and we are not soliciting any action based upon it; (ii) not to be construed as an offer to sell or a solicitation of an offer to buy any security in any jurisdiction where such offer or solicitation would be illegal; and (iii) based upon information from sources that we consider reliable, but has not been independently verified by Nomura Group. Nomura Group does not warrant or represent that the document is accurate, complete, reliable, fit for any particular purpose or merchantable and does not accept liability for any act (or decision not to act) resulting from use of this document and related data. To the maximum extent permissible all warranties and other assurances by Nomura group are hereby excluded and Nomura Group shall have no liability for the use, misuse, or distribution of this information. 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Singapore Primer 2012 Nomura 11.21.11

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ANCHOR REPORT

Singapore outlook 2012

November 21, 2011 Research analysts

As growth slows, we like yield plays but property pullback is a risk

Key analysis in this anchor report includes:

Singapore outlook 2012

ANCHOR REPORT: Staying defensive

November 21, 2011

As growth slows, we like yield plays but property pullback is a risk

Given Singapores trade with China, a hard landing there would

Themes: China hard-landing scenario

Nomura | Singapore outlook 2012

November 21, 2011

Another year of consolidation Sector strategy

Our stock picks for 2012

Valuation and earnings

2012 year of reckoning for residential property market

Promising companies with undervalued optionality

China hard landing and implications for Singapore

Economics Banks Conglomerates/Industrials Plantations/Commodities Gaming Property Telecom Transport

Nomura | Singapore outlook 2012

November 21, 2011

102 Singapore Telecom

109 Appendix A-1

Nomura | Singapore outlook 2012

November 21, 2011

Another year of consolidation

Source: Bloomberg, Nomura research

Source: Nomura estimates

Nomura | Singapore outlook 2012

November 21, 2011

Fig. 3: NODX vs PMI

Fig. 4: FSSTI vs Industrial Production Index

Source: CEIC, Nomura research

Source: CEIC, Nomura research

Fig. 6: Wage growth vs productivity growth

Source: CEIC, Nomura research

Source: CEIC, Nomura research

Nomura | Singapore outlook 2012

November 21, 2011

Fig. 7: Correlation of PPI with FSSTI

Source: Bloomberg, Nomura research

Source: Bloomberg, Nomura research

Nomura | Singapore outlook 2012

November 21, 2011

Fig. 9: Total returns for Singapore market 2000 to YTD

Nomura | Singapore outlook 2012

November 21, 2011

Fig. 11: Underperformers in 2H2011

Source: Bloomberg, Nomura research

Source: Bloomberg, Nomura research

Nomura | Singapore outlook 2012

November 21, 2011

Fig. 12: Summary of sector view

UOL, CMA, CCT

Source: Nomura research

Nomura | Singapore outlook 2012

November 21, 2011

Our stock picks for 2012

Fraser & Neave

Reasonably priced, with optionality CapitaMall Asia 1.36

OCBC Keppel Corp Biosensors

8.36 9.30 1.39