Asia Pacific Equity Research | Singapore

MARKET

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Key Idea
Chg 5.6 0.7 1.3 1.5 3.2 1822.6 -659.8 % Chg 0.2 0.6 0.2 0.2 0.6 71.1 -39.6

Morning Call 3 Apr 2012

Key Singapore Indices Close 3016.1 118.4 713.0 648.4 562.1 4384.8 1004.6

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

World Indices Close 13264.5 3119.7 1419.0 5874.9 1603.8 20522.3 10109.9 1199.1 2029.3 7862.9 Chg 52.5 28.1 10.6 106.4 7.5 -33.3 26.3 2.3 15.3 -70.1 % Chg 0.4 0.9 0.8 1.8 0.5 -0.2 0.3 0.2 0.8 -0.9

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

DBS: Acquiring Danamon DBS Group Holdings is acquiring a 67.4% stake in Bank Danamon for S$6.2b. This is priced at a 52.2% premium over Danamons closing price on 30 March 2012 or valuing it at 2.6x book. The transaction will be funded by the issuance of 439m new DBS shares at S$14.07 per share to Temasek, increasing DBSs issued shares by 18.7% to 2,789m. There is also going to be a mandatory tender offer (MTO) for the rest of the Danamon shares, and assuming full acceptance, this will amount to an additional IDR21.2T (S$2.9b). This deal is expected to be EPS and ROE accretive by 2015. Integration with PT Bank DBS Indonesia will make it the 5th largest bank in the country. Over the longer run, this is a strategic move to deepen its market presence in Indonesia, which is still an Asian growth engine. However, for the near term, the acquisition premium and the potential dilution could act as dampeners as execution risks add to uncertainty. We are retaining our estimates, BUY rating and fair value estimate of S$15.40 for now. More reports: - Venture Corp: Recovery in sight - Bumi Armada: Maintain HOLD on limited upside - Keppel Corporation: Secures US$205m jack-up rig contract - Tee International: CAD investigations - Sembcorp Marine: Clinches US$568m semi-sub order

Market Statistics (SG) STI No. No. No. 52-week range of gainers of losers of unchanged 2,522 3,227 324 199 151

Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$) 1.3 82.1 0.4 0.5 104.9 0.0 0.1 0.0 0.0 -0.4

News Headlines US stocks and commodities advanced on the back of stronger than forecasted growth in US manufacturing. The S&P 500 Index gained 0.7% to close at 1,418.90, adding to the first quarter rally of 12%. Ocean Sky International has proposed an acquisition of ChiwayLand Group (Singapore) Pte. Ltd., which would constitute a very substantial acquisition or reverse takeover. Ryobi Kiso has been awarded a new contract in Vietnam worth VND448.8b (~S$27.3m) by the BITEXCO group, one of Vietnams leading real estate developers. Union Steel Holdings has completed tranche one of the consideration to acquire the entire issued share capital of Hock Ann Metal Scaffolding Pte. Ltd.

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.

MITA No. 023/06/2011

OCBC Investment Research Market Pulse 3 Apr 2012

DBS: Acquiring Danamon Acquiring Danamon from Temasek Aims to be accretive by 2015 Strategic for LT, but selling likely in ST Valuing Danamon at S$9.1b DBS Group Holdings is taking over Temasek Holdings entire stake (or 67.37%) in PT Bank Danamon Indonesia Tbk (Danamon) for a total consideration of IDR45.2T (or S$6.2b). At IDR7,000 per share, this is priced at a premium of 52.2% above Danamons closing price on 30 March 2012 or valuing the group at 2.6x book value. Danamon has about 3,000 branches with about 6m customers. The transaction will be funded by the issuance of 439m new DBS shares at S$14.07 per share to Temasek, increasing DBSs issued shares by 18.7% to 2,789m. As a result of this, Temaseks stake in DBS will rise from 29.5% to 40.4%. There is also going to be a mandatory tender offer (MTO) for the rest of the Danamon shares, and assuming full acceptance, this will amount to an additional IDR21.2T (S$2.9b). Accretive by 2015; new equity of S$6.2b vs. goodwill of S$5.5b This deal is expected to be EPS and ROE accretive by 2015. Completion is slated for 2H12, integration will commence in 2013 and synergies are expected from 2014 once all the approvals have been secured. Based on 31 Dec 2011 numbers, the pro-forma NAV is S$12.27 (versus actual of S$11.99), EPS is S$1.21 (S$1.30) and total CAR is 14.8% (15.8%). Becoming the 5th largest bank in Indonesia This acquisition will strengthen its presence in the still robust Indonesian economy, and with a planned merger with PT Bank DBS Indonesia (subject to regulatory approvals), this will make it the 5th largest bank in Indonesia. Management intends to grow Danamons consumer as well as corporate businesses. Strategic for the long term; but could see near term selling pressure Over the longer run, this is a strategic move to deepen its market presence in Indonesia, which has been one of the key growth economies in the region with its diverse and

term, the acquisition premium and the potential dilution could act as dampeners as execution risks add to uncertainty. We are retaining our estimates, BUY rating and fair value estimate (S$15.40). (Carmen Lee)

Venture Corp: Recovery in sight More optimistic industry data Sanguine on growth prospects Upgrade to BUY; higher S$9.41 FV Industry conditions may have bottomed out Recent industry data have provided optimism that conditions in the technology and manufacturing sector may have bottomed out. Singapores electronics exports increased at an encouraging 3.9% YoY for the combined months of Jan and Feb this year. The electronics PMI also expanded for a second consecutive month in Feb, registering a reading of 51. Similarly, Chinas manufacturing PMI grew to 53.1 in Mar, exceeding market expectations and registering its highest reading since Mar 2011. Nevertheless, we believe that downside risks still exist in the global economy. Expect earnings momentum to gain traction progressively While Venture Corp (VMS) acknowledges the ongoing macroeconomic uncertainties, it sounded more upbeat about its prospects for FY12 during our recent management meeting. This is underpinned by new product launches and better traction from several key customers. We expect its earnings momentum to pick up progressively after the seasonally weak first quarter. Hence FY12 is likely to be a back-end loaded year for VMS. The groups healthy balance sheet (net cash of S$309.1m as at 31 Dec 2011) would also increase its resilience to weather the volatile business environment. Upgrade to BUY Looking ahead, we believe that VMS is wellpositioned to acquire new customers and gain market share from competitors as it continues its strategic focus on moving up the technological value chain. This entails the provision of products, services and solutions with higher design and engineering capabilities, thus allowing room for margin expansion and enhancing its stickiness with its customers. We finetune our assumptions

growing industries. However, for the near

OCBC Investment Research Market Pulse 3 Apr 2012

following a change of analyst coverage, and ascribe a higher valuation peg of 15x (previously 12.5x) to VMSs FY12F EPS, representing a slight premium to its 5-year average forward PER. This is supported by improving prospects of the group, coupled with growing market risk appetite. Our fair value estimate increases from S$7.83 to S$9.41. Dividend yield is also attractive at 6.4%. Upgrade to BUY. (Andy Wong)

the group for its sound strategy and steady execution, we think much of the positives are already priced in. Maintain HOLD with a higher fair value estimate of M$4.76. (Chia Jiunyang)

Keppel Corporation: Secures US$205m jack-up rig contract Keppel Corporation (KEP) announced that Keppel AmFELS has secured a contract from Mexicos Perforadora Central to build a repeat jack-up rig worth US$205m. Scheduled for delivery in 1Q14, this high spec unit will be based on the LeTourneau Super 116E design, which is the same design that Perforadora ordered in Mar last year from KEP. This latest order has a price tag that is 5.1% higher than that last contract, and will be the fourth jackup project taken on by KEP for Perforadora. Meanwhile, as Keppel AmFELS continues to pursue projects from PEMEX, management is optimistic about its chances. Maintain BUY with S$12.27 fair value estimate. (Low Pei Han)

Bumi Armada: Maintain HOLD on limited upside. Strengthening FPSO capabilities Well-positioned for an OSV market recovery Positives priced in Building up its FPSO capabilities. Bumi Armadas FPSO1 business accounts for ~50% of its total revenue and will continue to be a key growth driver over the medium term horizon. Recall that the group operates three FPSO vessels and have secured another two contracts (currently under construction) last year. While the recent contracts are arguably more complex (requiring turret mooring systems for harsher waters), they also enable its in-house engineering and project management teams to acquire the necessary experience to move up the FPSO value chain. Over time, this should translate into more contract wins, reduced execution risks and lower engineering costs. Recovering OSV market. Although the OSV2 market had suffered from an oversupply of vessels over the past several years, the demand/supply situation appears to have stabilized, helped by a recent uptick in rig activities. With one of the largest and most modern OSV fleet in the region, we think that Bumi Armada is well-positioned to benefit from a recovery in day-rates. In addition, the group has also managed to secure long-term contracts for its vessels since the beginning of this year. It was awarded two four-year contracts (with extension of four years) by Petrobras for its AHTS3 and PSV4 for M$150m and M$115m respectively. Maintain HOLD with higher fair value estimate of M$4.76. In view of the recent re-rating of the sector, we are increasing our peg for Bumi Armada to 25x (previously 21x), such that it is in-line with its peers (whose shares are trading at between 22x to 27x FY12F EPS). While we like

Tee International: CAD investigations Tee International (TEE) disclosed that its independent director and non-executive chairman Mr. Bertie Cheng, and Group CEO and managing director Mr. CK Phua are currently the subjects of investigations by Commercial Affairs Department (CAD). Mr. Cheng and Mr. Phua are currently assisting the CAD with its investigations on possible contravention of market rigging provisions in the Securities and Futures Act and have indicated that they will cooperate fully with CAD in its investigations. TEE said its operations are not affected by the CAD investigations. We put our BUY rating and fair value estimate of S$0.36/share UNDER REVIEW and will speak to management for more updates. (Eric Teo)

OCBC Investment Research Market Pulse 3 Apr 2012

Sembcorp Marine: Clinches US$568m semisub order

Sembcorp Marine (SMM) announced that Jurong Shipyard has secured a US$568m contract to build a harsh environment ultra-deepwater semi-submersible rig from North Atlantic Drilling, which is a 74%-owned subsidiary of Seadrill. The new rig will be based on the Moss Maritime CS60 design an enhancement of the Moss Maritime CS50E MKII rigs (West Pegasus and West Leo) that were delivered by Jurong to Seadrill in Mar 2011 and Jan 2012, respectively. Scheduled to be delivered no later than 1Q15, this contract is not expected to have a material impact on SMMs earnings this year. As expected, semi-sub projects are starting to stream in after an absence of orders previously. Meanwhile, SMM has clinched about S$2.4b worth of new orders this year, accounting for 28% of our S$8.7b full-year estimate (inclusive of Petrobras orders). Maintain HOLD with S$5.70 fair value estimate. (Low Pei Han)

OCBC Investment Research Market Pulse 3 Apr 2012

Calendar of key events

Mon 02-Apr-12 Tue 03-Apr-12 Wed 04-Apr-12
US Mins of FOMC Meeting

Thur 05-Apr-12
Dyna 3Q12 (est)

Fri 06-Apr-12
US Mar Chg in Nonfarm Payrolls US Mar Unemployment Rate

09-Apr-12
CH Mar CPI

10-Apr-12
CH Mar Exports

11-Apr-12

12-Apr-12
US Feb Trade Balance Lian Beng 3Q12 (est) Van Der Horst 3Q12 (est) EOC 2Q12 AIMS AMP FY12 (est)

13-Apr-12
SPH 4Q11 (est) US Mar CPI/US Apr U of Michigan Confidence CH Mar Ind Production CH 1Q Real GDP SG Feb Retail Sales SPH 2Q12

16-Apr-12
US Feb Business Inventories

17-Apr-12
US May Housing Starts SGX 3Q

18-Apr-12
Qian Hu 1Q12 Ascendas REIT FY12 (est) Rickmers 1Q12 (est) Keppel T&T (est)

19-Apr-12
K-Green/Sakari Res 1Q12 (est) Ezra 2Q12 (est) Keppel Land 1Q12 (est) CCT 1Q12 (est) MLT 1Q12

20-Apr-12
Keppel Corp/FSLT 1Q12 (est) CMT/Broadway 1Q12 (est) Aztech/GMG 1Q12 (est) STATS /CMA 1Q12 (est) Suntec/HLF/FCT 1Q12 (est) CCT/ART 1Q12 (est) Kep Corp/FSLT 1Q12 (est)

23-Apr-12
SG Mar CPI

24-Apr-12

25-Apr-12
US Mar Durable Gds Orders SSL/Blumont 1Q12 (est) Spore Reinsurance 1Q12 (est)

26-Apr-12
US Apr FOMC Rate Dec Gul/CapitaLand 1Q12 (est)

27-Apr-12
US 1Q GDP QoQ Baker/San Teh 1Q12 (est) Del Monte/IPC 1Q12 (est) China Dairy 1Q12 (est) Spore Land 1Q12 (est)

30-Apr-12
SG Mar Bank Loans & Adv SG Mar Money Supply SG 1Q Unemployment Rate Jiutian 1Q12 (est)

01-May-12
China Apr PMI Greater China Prec FY11 (est)

02-May-12
Nera Telecom 1Q12 (est) Multi-Chem 1Q12 (est)

03-May-12
Treasury China 1Q12 (est) RH Energy 1Q12 (est) Fortune REIT 1Q12 (est) Wing Tai 3Q12 (est) China Env 1Q12 (est)

04-May-12
US Apr Chg in Nonfarm Payrolls US Apr Unemployment Rate Manhattan Res/Rotary Eng 1Q12 (est) Boardroom 3Q12 (est) China Energy 1Q12 (est)

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 3 Apr 2012

OCBC Investment Research Market Pulse 3 Apr 2012

SHAREHOLDING DECLARATION:

The analyst/analysts who wrote this report hold NIL shares in the above security.

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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