Asia Pacific Equity Research | Singapore

MARKET

PULSE
Key Idea
Chg -1.9 2.4 0.9 0.2 -1.5 507.9 482.2 % Chg -0.1 1.7 0.1 0.0 -0.3 22.3 46.7

Morning Call 19 Dec 2012

Key Singapore Indices Close 3156.8 146.7 807.6 777.0 515.9 2790.4 1514.5

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

World Indices Close 13351.0 3054.5 1446.8 5935.9 1659.4 22494.7 9923.0 1362.9 1993.1 7643.7 Chg 115.6 43.9 16.4 23.8 10.9 -18.9 94.1 3.9 10.0 12.5 % Chg 0.9 1.5 1.1 0.4 0.7 -0.1 1.0 0.3 0.5 0.2

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

SG Residential Property: Spate of privatizations could come Given the current environment of low borrowing costs and steep trading discounts to RNAV for high-end developers, it is likely that we could see a spate of privatization activity ahead. We believe potential candidates for privatization include those are trading significantly below RNAV, have a low public float, and have major holders with stakes above 50%. These criteria yield two additional candidates for privatization: Ho Bee and Wheelock. For physical home sales, we saw ~20.9K new homes (excluding landed and EC) sold by developers year to date, of which the bulk (74%) are mass-market units. As interest rates remain low, we believe that continued monetary liquidity in the market would underpin demand for mass-market units. We forecast for mass market property prices to appreciate 0%-5% in 2013. For high-end property, we expect prices to dip 0% 10% in 2013, due to the impact of recent cooling measures. We maintain our OVERWEIGHT rating on the residential property sector and expect continued strength in the massmarket segment in FY13. Our top stock pick is City Developments [FV: S$13.96, BUY] for its sharp execution, effective land-banking strategy and strong balance sheet. (Eli Lee)

Market Statistics (SG) STI No. No. No. 52-week range of gainers of losers of unchanged 2,607 3,173 298 195 195

News Headlines US stocks rose for a second day on Tue, on signs of progress towards a deal to avoid the fiscal cliff of spending cuts and tax increases next year. The Dow ended 0.9% higher at 13,350.96, while the S&P 500 Index rose 1.1% to 1,446.79 and the Nasdaq finished 1.5% higher at 3,054.53. Cambridge Industrial Trust (CIT) has agreed to buy an indirect 60% stake in a 316k sq ft industrial facility in the JTC Tuas Biomedical Park for S$15.0m that will be leased to a unit of pharmaceutical company Strides Arcolab for 25 years. The property was introduced to CIT by sponsor Oxley Global, which will own the remaining 40% stake. Hiap Seng Engineering has won a THB652m (S$26m) structural steel fabrication contract for a liquefied natural gas terminal project in Australia. Work on the project is expected to begin early next year and is scheduled for completion by May 2014.

Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$) 1.2 84.3 0.4 0.3 87.9 0.0 0.0 0.0 0.0 0.7

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

Sources: MasNet, Bloomberg, Business Times, Straits Times and other media

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

MICA (P) 039/06/2012

OCBC Investment Research Market Pulse 19 Dec 2012

SG Residential Property: Spate of privatizations could come Privatizations could lie ahead Ho Bee and Wheelock candidates for privatization Mass-market sales to stay firm Spate of privatizations could come. As indicated in our last residential sector report dated 26 Jun 2012, there is deep value embedded in high-end developer stocks. As a group, SC Global (before its privatization offer), Wing Tai and Ho Bee, are now valued at 0.76x books value, still below average levels seen over 2Q09-2Q11. Given the current environment of low borrowing costs and steep trading discounts to RNAV for high-end developers, it is likely that a spate of privatization activity lies ahead. We believe potential candidates for privatization include those are trading significantly below fair value, have a low public float, and have major holders with stakes above 50%. Possible privatization candidates: Ho Bee and Wheelock From our criteria, we find two likely candidates for privatization: Ho Bee and Wheelock. Ho Bee is currently trading at 0.76x book, with a public float of 25% and a majority shareholder stake of 69%. Wheelock is currently trading at 0.79x book with a 24% public float and a major shareholder stake of 76%. Already we have seen the main shareholder of SC Global, Simon Cheong, make a voluntary unconditional cash offer of S$1.80 per share for all issued ordinary shares. One possible implication of privatization is that, as a non-foreign company, SC Global could avoid the qualifying certificate penalties related to not selling off projects two years after achieving TOP. Mass-market prices likely to stay firm still a mass market story in 2013 Year to date, we have seen ~20.9K new homes (excluding landed and EC) sold by developers, of which the bulk (74%) are mass-market (OCR) units. As interest rates remain low, we believe that continued monetary liquidity in the market would underpin demand for mass-market units. We forecast for mass market property prices to appreciate 0%-5% in 2013. For high-end property, we expect prices to dip 0% - 10% in 2013, due to the impact of recent cooling measures.

Maintain OVERWEIGHT on sector. We maintain OVERWEIGHT rating on the residential property sector and expect continued strength in the mass-market segment in FY13. Our top stock pick is City Developments [FV: S$13.96, BUY] for its sharp execution, effective land-banking strategy and strong balance sheet. (Eli Lee) . . . . .

OCBC Investment Research Market Pulse 19 Dec 2012

Calendar of key events

17-Dec-12
SG Nov NODX

18-Dec-12

19-Dec-12
US Nov Housing Starts

20-Dec-12
US 3QGDP US Dec Philadelphia Fed US Nov Existing Home Sales US Nov Leading Indicators

21-Dec-12
US Dec U of Michigan Confidence

24-Dec-12
SG Nov CPI US Nov Durable Goods Orders

25-Dec-12

26-Dec-12
SG Nov Industrial Production

27-Dec-12
US Nov New Home Sales

28-Dec-12

31-Dec-12

01-Jan-13

02-Jan-13

03-Jan-13

04-Jan-13

07-Jan-13

08-Jan-13

09-Jan-13

10-Jan-13

11-Jan-13

14-Jan-13

15-Jan-13

16-Jan-13

17-Jan-13

18-Jan-13

Notes:

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

OCBC Investment Research Market Pulse 19 Dec 2012

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

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RATINGS AND RECOMMENDATIONS:

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

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Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd