Asia Pacific Equity Research | Singapore

MARKET

PULSE Key Idea

Key Singapore Indices Close

Chg

% Chg

2,814.7 748.7

5.4 1.9

0.2 0.3

Property Electronics

691.2 249.2

1.9 -2.9

0.3 -1.2

Vol (m) Val (S$m)

1,174.3 661.8

-212.7 -103.4

-15.3 -13.5

STI Finance

World Indices Close

Chg

% Chg

17,721.3

164.8

0.9

Nasdaq S&P500

4,872.1 2,061.7

38.7 19.7

0.8 1.0

FTSE KLCI

6,242.4 1,715.0

42.3 -0.3

0.7 0.0

20,504.4 15,928.8

63.6 177.7

0.3 1.1

SET KOSPI

1,385.4 1,981.3

15.6 11.0

1.1 0.6

TWSE

8,531.2

-31.4

-0.4

Dow Jones

Hang Seng Nikkei

Morning Call 13 Apr 2016

Land Transport Sector: New regulations unsurprising Yesterday, LTA announced new regulations for private hire car drivers and vehicles with a focus on protecting commuter safety, and are expected to take effect by 1H17. One key aspect is the introduction of private hire car driver’s vocational license (PDVL), requiring all private hire car drivers to be registered with LTA, undergo relevant training (~10 hours) among many other new requirements that draw similarities with the existing taxi regulations, albeit less stringent. In addition, the existing taxi driver vocational license course is also revamped to close the gap with the new PDVL, with changes expected to take effect from May 16. In our view, we believe the new regulations do not really close the gap between taxi operators and private hire car services in terms of standards and requirements. Therefore, we do not rule out the possibility of further changes or introduction of new measures. Maintain NEUTRAL on land transport sector for now. CDG [BUY; FV: S$3.40] remains as our sector top pick while we still expect SMRT [HOLD; FV: S$1.51] to face cost pressures ahead.

More reports: Market Statistics (SG) STI 52-week range No. of gainers

2,528

No. of losers No. of unchanged

3,550 241 213 179

1.344 108.540

0.0 -0.6

3-mth S$ SIBOR

1.063

0.0

3-mth US$ LIBOR

0.630

0.0

42.170

1.8

Crude futures (US$)

News Headlines  Keppel T&T announced that its JV with Keppel Land has secured $84.5m in contracts to provide colocation and data centre services at Keppel Datahub 2.

Economic Statistics S$/US$ Yen/US$

 Singapore Press Holdings: Cost management delivering results

Research Team (65) 6531 9800 e-mail: [email protected]

 Cordlife Group Ltd has appointed Tan Poh Lan as Group Chief Operating Officer with immediate effect. She was formerly the CEO of Gleneagles hospital in Singapore and most recently the CEO of Fortis Healthcare Singapore.  LG Electronics announced pre-1Q16 guidance based on unaudited operating statistics, noting a 4.5% YoY drop in 1Q16 sales but 65.5% increase in operating income.  China Automation Group Ltd announced that it has received a letter citing a potential voluntary conditional general offer for all outstanding shares of the company, at a possible offer price of HK$1.20/share in cash.  Miyoshi Ltd’s 2QFY16 recorded an 8.4% decline in revenue to S$13.3m but due to a 48% drop in tax expenses to S$0.1m, its PATMI jumped 211.7% YoY to S$0.4m.

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

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

 Xxxx  Xxxx

MCI (P) 007/06/2015

OCBC Investment Research Market Pulse 13 Apr 2016

Land Transport Sector: New regulations unsurprising

CDG still our sector top pick In all, while the new regulations and changes are good for the industry, they are not surprising to us, though we were expecting more steps taken by the government to level playing field in areas of competitiveness of business models, which ultimately affects profitability. Therefore, we do not rule out the possibility of further changes or introduction of new measures. Maintain NEUTRAL on land transport sector for now. CDG [BUY; FV: S$3.40] is still our top pick within the sector given the expected improvement in cash flow and possibly higher dividends post bus reform, while SMRT [HOLD; FV: S$1.51] continues to face pressures on increasing maintenance-related expenses. (Eugene Chua)

 Leveling playing field  NTA wants more changes  Maintain NEUTRAL Changes in regulations impact drivers more than operators Yesterday, LTA announced new regulations for private hire car drivers and vehicles with a focus on protecting commuter safety, and are expected to take effect by 1H17 (refer to exhibit 1). One key aspect is the introduction of private hire car driver’s vocational license (PDVL), requiring all private hire car drivers to be registered with LTA, undergo relevant training (~10 hours), pass requisite tests, and attend refresher course every six years, among many other new requirements that draw similarities with the existing taxi regulations, albeit less stringent. In addition, the existing taxi driver vocational license (TDVL) course is also revamped to close the gap with the new PDVL, with changes expected to take effect from May 16. Some changes include reducing TDVL course from ~60 hours to ~25 hours and refresher course every six years from 6 or 9 hours to 3 or 5 hours, respectively. In our view, these changes only help level the playing field in relation to requirements on drivers, but not helping in closing the gaps relating to requirements and standards imposed on the two different business models.

Singapore Press Holdings: Cost management delivering results  Ad revenues continue downtrend  Increasing newspaper prices  Pty contributions remain firm Unabated pressure on the media topline Singapore Press Holdings (SPH) reported that its 2QFY16 PATMI decreased 19.6% YoY to S$63.8m mostly due to lower revenues from its media segment, weaker net income from investments and lower share of results of associates due to the absence of a S$7.4m restructuring gain booked in the corresponding quarter last year; partially offset by lower materials, production and distributions costs, staff costs, finance costs and other operating expenses. In terms of the topline, 2QFY16 revenues dipped marginally from S$275.4m a year ago to S$259.3m. Unsurprisingly, we saw continued pressure on the media segment topline which fell 6.0% to S$190.7m in the latest quarter, while property and other revenues partially offset this with 0.9% and 9.5% YoY growth to S$61.1m and S$7.5m, respectively. Overall, we deem this quarter’s results to be broadly within expectations. SPH declared an interim dividend of 7.0 S-cents, which was unchanged from last year and similarly within expectations.

Playing field not exactly that level yet In response, service providers of private hire car, Grab and Uber, expressed support for the new regulations. Rightfully so, especially since the introduction of new regulations is a signal that the government supports such business innovation that helps fill demand and supply gaps where traditional taxis are unable to during peak periods. Singapore’s National Taxi Association (NTA), however, thinks more changes are needed to level the playing field in areas of cost and pricing between taxi operators and private hire car service providers. These areas include compliance requirements such as insurance coverage and emission standards imposed on taxi operators (but not on private hire car services), which costs are subsequently passed on to the taxi drivers and commuters. Pricing was also an untouched area, where private hire car services can adjust pricing according to market demand and supply but traditional taxi operators are not allowed to do so. Strict taxi availability standards such as the minimum daily mileage required of traditional taxi operators continue to be not applicable for private hire car services.

Rolling out increases in newspaper cover prices The advertising market remained soft over the latest quarter, with total newspaper ad revenue down 8.4% YoY (display ad revenues down 7.6% and classified down 9.9%). In 1H16, management had focused on keeping costs low and this has yielded results. Newsprint costs, staff costs and other materials, production and distribution costs all fell 10.7%, 4.9% and 1.9%,

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OCBC Investment Research Market Pulse 13 Apr 2016

respectively. We understand that management is rolling out increases in newspaper cover prices; this is expected to marginally boost circulation revenues which currently constitutes 14.6% of 1H16 operating revenues of S$555.5m. In the property segment, 1H16 net property income grew 8.2% to S$88.7m, boosted by Seletar Mall which commenced business in Nov 2014 and higher rental income from Paragon and The Clementi Mall. Maintain HOLD with an unchanged fair value estimate of S$3.78. (Carmen Lee)

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OCBC Investment Research Market Pulse 13 Apr 2016

Calendar of key events 11-Apr-16

12-Apr-16

13-Apr-16

14-Apr-16

15-Apr-16

CN Mar CPI

SPH 2QFY16

CRCT 1Q16 Results

Keppel REIT 1QFY16

ART 1QFY16

CN Mar PPI

Keppel DC REIT 1QFY16

Keppel T&T 1QFY16

CCT / CMT 1QFY16

CN Mar Money Supply M2 YoY

Keppel Infra Trust 1QFY16

Soilbuild REIT 1QFY16

CN Q1 GDP

M1 1QFY16

US Initial Jobless Claims

SG Feb Retail Sales

US Mar CPI

CN Mar Industrial Production

18-Apr-16

19-Apr-16

20-Apr-16

21-Apr-16

22-Apr-16

Keppel Corp 1QFY16

US Mar Housing Starts

SGX 3QFY16

FCOT 2QFY16

Cache Logistics Trust 1QFY16

US Mar Existing Home Sales

US Initial Jobless Claims

FCT 2QFY16

SG Mar NODX

Starhill REIT 3QFY16

25-Apr-16

26-Apr-16

27-Apr-16

28-Apr-16

29-Apr-16

Mapletree Indus Trust 4QFY16

Mapletree Comm Trust 4QFY16

MGCCT 4QFY16

SMRT 4QFY16

CDLHT 1QFY16

SG Mar CPI

SG Mar Industrial Production

Memtech / UOB 1QFY16

Indofood Agri 1QFY16

US Mar Durable Goods Orders

VMS 1QFY16

OCBC 1QFY16

US FOMC Rate Decision

MLT 4QFY16

US Initial Jobless Claims

2-May-16

3-May-16

4-May-16

5-May-16

6-May-16

US Markit Manufacturing PMI

CN Caixin PMI

US Trade Balance

CWT 1QFY16

US Change in Nonfarm Payrolls

ISM Manufacturing

9-May-16

US Durable Goods Orders

10-May-16

11-May-16

US Unemployment Rate

12-May-16

13-May-16

CSE 1QFY16

SIA 4QFY16

NOL 1QFY16

CN CPI

CDG 1QFY16

Midas 1QFY16

CN Money Supply M2 YoY

US Retail Sales Advance SG Retail Sales

Notes:

Sourced from Bloomberg 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.

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OCBC Investment Research Market Pulse 13 Apr 2016

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

DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without the written consent of OCBC Investment Research Pte Ltd (“OIR” or “we”). This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein or to participate in any particular trading or investment strategy. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. In the event that you choose not to seek advice from a financial adviser, you should consider whether investment in securities and the securities mentioned herein is suitable for you. Oversea-Chinese Banking Corporation Limited (“OCBC Bank”), Bank of Singapore Limited (“BOS”), OIR, OCBC Securities Pte Ltd (“OSPL”) and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. The information provided herein may contain projections or other forward looking statements regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures are not necessarily indicative of future or likely performance. Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Bank, BOS, OIR, OSPL and their respective connected and associated corporations shall be understood as neither given nor endorsed.

RATINGS AND RECOMMENDATIONS: - OCBC Investment Research’s (OIR) technical comments and recommendations are short-term and trading oriented. - OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIR’s BUY rating indicates a total expected return in excess of 10% based on the current price; a HOLD rating indicates total expected returns within +10% and -5%; a SELL rating indicates total expected returns less than -5%. - For companies with market capitalization of S$150m and below, OIR’s BUY rating indicates a total expected return in excess of 30%; a HOLD rating indicates total expected returns within a +/-30% range; a SELL rating indicates total expected returns less than -30%.

Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

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