Asia Pacific Equity Research | Singapore

MARKET

PULSE Key Idea

Key Singapore Indices

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

Close 2883.4 118.1 694.7 624.4 508.0 2315.8 1432.8

Chg -20.2 -2.5 -2.7 -1.1 -0.3 -102.2 -102.0

% Chg -0.7 -2.0 -0.4 -0.2 -0.1 -4.2 -6.6

Close 12820.6 2933.8 1353.4 5575.5 1584.3 19964.6 8953.3 1191.0 1917.1 7401.4

Chg -34.4 0.2 -4.6 31.6 -3.7 -262.7 -56.3 0.4 -27.8 -82.6

% Chg -0.3 0.0 -0.3 0.6 -0.2 -1.3 -0.6 0.0 -1.4 -1.1

World Indices

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

Market Statistics (SG) STI No. No. No.

52-week range of gainers of losers of unchanged

Morning Call 14 May 2012

2,522

3,227 138 407 147

Golden Agri-Resources Ltd: Upgrade to BUY Golden Agri-Resources (GAR) reported its 1Q12 results last Friday, with revenue rising 3.8% YoY and 14.4% QoQ to US$1519.1m, while net profit fell 30% YoY to US$162.0m (but made a 113% QoQ recovery). But it was a strong 113% QoQ recovery. All in, with revenue meeting 26.8% and earnings 28.1% of our full-year forecasts, Going forward, GAR believes that the industry outlook remains resilient with robust demand growth for palm oil coming from both emerging and develops countries; prices are also likely to be supported by limited supply growth of other vegetable oils, especially soybean. With numbers coming in mostly in line with our expectations, we are keeping our FY12 and FY13 forecasts unchanged. Still based on 12.5x FY12F EPS, our fair value also remains unchanged at S$0.77. But we upgrade our rating from Hold to BUY as the stock price has corrected quite a bit since our previous downgrade which we believe should have captured quite a bit of the negatives. More reports: -

Pacific Andes: Outlook is fairly positive BreadTalk Group: Promising outlook ahead CSE Global: Buy into the recovery UOL Group: 1Q12 earnings in line – Upgrade to BUY Goodpack Limited: Cost controls working out SATS Ltd: Results in line with expectations Swiber Holdings: 1Q12 results within expectations

News Headlines Economic Statistics S$/US$ Yen/US$ 3-mth S$ SIBOR 3-mth US$ SIBOR Crude futures (US$)

1.3 79.9 0.4 0.5 95.4

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

0.0 0.3 0.0 0.0 -0.7

• The US stock indexes edged lower as news of US$2b in trading losses at J.P. Morgan Chase led financials lower. The S&P 500 Index and DJIA both dropped 0.3% on Friday. • Over the weekend, Greece failed to form a coalition party, increasing concerns about an exit from the euroarea zone. Another vote might take place as early as next month. • Chuan Hup Holdings 3Q12 net profit rose by 24% YoY to US$12.8m. Revenue had jumped from US$1.8m to US$56m mainly due to the consolidation of PCI Ltd’s results. • Chemoil Energy’s saw 1Q12 net profit decline 62% YoY to

US$8.8m. Revenue had grown 36% to US$3.5b. • Shipbuilder Jaya Holdings registered a 89% YoY drop in net profit for 3Q12 to US$3.8m. Revenue had climbed by 17% to US$16.2m. 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 14 May 2012

Golden Agri-Resources Ltd: Upgrade to BUY

Pacific Andes: Outlook is fairly positive ●Broad-based improvement in 2Q ●Fishing outlook is fairly positive ●Aiming to improve SCM margin

●Decent start to 2012 ●Outlook still mildly positive ●Upgrade to BUY

Stronger-than-expected 2Q results Pacific Andes Resources Developments Ltd (Pacific Andes) reported a strong set of 2Q results (for the 3-month period ended 28 March 2012). Revenue grew 35% to HK$3,320.5m. Net earnings improved 23% YoY to HK$333.0m and also higher than our estimates. This gives 1H net earnings of HK$472.6m, or 65% of our full year estimates. The group attributed the better performance to both its core businesses of frozen fish SCM (53% of revenue) as well as better high revenue from its fishery and fish supply business (47%). The key markets are China (accounting for 69% of sales), Africa (13%), East Asia (9%) and Europe (8%).

Decent start to 2012 Golden Agri-Resources (GAR) reported its 1Q12 results last Friday, with revenue rising 3.8% YoY and 14.4% QoQ to US$1519.1m, buoyed by still-firm CPO prices; GAR achieved ASP of US$1009/ton versus US$1150 in 1Q11 and US$965 in 4Q11. However, due to higher fertiliser application and labor cost, net profit fell 30% YoY to US$162.0m. But it was a strong 113% QoQ recovery. All in, with revenue meeting 26.8% and earnings 28.1% of our full-year forecasts, GAR has made a decent start to 2012. We understand that GAR has also largely cleared the bulk of unsold inventory from 4Q11 although it has started to build inventory ahead of the Hari Raya festivities.

Several positives on the horizon For its South Pacific fishing operation, the group has deployed one super-trawler to Namibia to catch Horse Mackerel. In terms of its key markets, China is stable and it is seeing demand coming back from Japan and Korea. Africa is expected to be the fastest growing market for the group. For the Peruvian Fishmeal & Fish Oil operation, catch volume was down, but sales volume went up because of accumulated inventory. Management is expecting higher quota utilization in the following months (8% of 1H quota was used up by March versus about 62% currently), better selling prices for fishmeal (from US$1200-1250 per ton to US$1400-1500 per ton) and better efficiency to be some of the key factors for the coming quarter. For the SCM division, this quarter should also see contribution coming in from Tassal as well as to work on improving the margin from the current 2% to about 2.53.0%.

Maintains mildly positive outlook Going forward, GAR believes that the industry outlook remains resilient with robust demand growth for palm oil coming from both emerging and develops countries; prices are also likely to be supported by limited supply growth of other vegetable oils, especially soybean. GAR intends to focus on expanding both its upstream and downstream capabilities. Out of the projected US$500m capex, US$200m going to expand its palm oil plantation by 20-30k ha (both greenfield and via M&As). Another US$200m will be used to increase its downstream processing capacity in strategic locations, while the remaining US$100m will be used for infrastructure to extend its distribution coverage and logistic facilities to enhance its integrated operations. Upgrade to BUY with unchanged S$0.77 fair value. With numbers coming in mostly in line with our expectations, we are keeping our FY12 and FY13 forecasts unchanged. Still based on 12.5x FY12F EPS, our fair value also remains unchanged at S$0.77. But we upgrade our rating from Hold to BUY as the stock price has corrected quite a bit since our previous downgrade which we believe should have captured quite a bit of the negatives. (Carey Wong)

Maintain BUY, fair value estimate of 17.8 cents Since announcing the recent 1-for-2 rights issues in early March, Pacific Andes shares have been languishing. While this was somewhat a dampener, the overhang is now over. We have adjusted our earnings for a better than expected 2Q, raising our FY12 earnings from HK$731m to HK$791m. Using the same 6.5x earnings peg and adjusting for the rights issue, our fair value estimate for the stock is 17.8 cents. At current price, we maintain our BUY rating. (Carmen Lee)

2

OCBC Investment Research Market Pulse 14 May 2012

BreadTalk ahead

Group:

Promising

outlook

results in-line with our expectations, we keep our FY12 projections unchanged and reaffirm our HOLD rating with an unchanged fair value estimate of S$0.57. (Lim Siyi)

● Slight improvement in 1Q ● Improving outlook with growth to persist ● Reaffirm management’s ability to control costs

CSE Global: Buy into the recovery ●Gross margins stabilizing at 31% ●Strong growth in the Americas region ●Better cashflow and lower leverage

Slight improvement in 1Q BreadTalk Group (BTG) reported slight improvements in its 1Q12 results as revenue grew 27.4% YoY (+5.6% QoQ) to S$106.1m on the back of stronger sales in China’s bakery division while gross profit margins improved by 0.5 percentage points YoY (-0.5 ppt QoQ) to 54.3%. In terms of its operating profit margins, BTG performed slightly better (2.4% vs. 1Q11: 2.3%) as higher contributions from the Bakery and Restaurant segments – boosted by China sales and Din Tai Fung (DTF) operations respectively – helped to offset weaker results from the Food court division, which was dragged lower by the Chinese and Singaporean locations. As a result, 1Q12 net profit climbed 15.1% YoY to S$1.4m although it fell -64.3% QoQ on seasonality factors (4Q is typically the strongest quarter). BTG’s top and bottom-line came in at 25.4% and 10.7% respectively, falling well within our expectations.

1Q results within expectations CSE Global (CSE)’s 1Q results came in broadly in line within our and the street’s expectations. 1Q12 revenue increased by 31% to S$134.7m (1Q11: S$102.6m), while net profit was flat at S$12.6m (1Q11: S$12.5m). Gross margin declined to 31.4% (1Q11: 40.9%; FY11: 31.6%), on (i) additional work incurred on its telecom projects, (ii) higher proportion of greenfield projects and (iii) lower license contribution from the UK healthcare sector. After three consecutive quarters of operating cash deficits, CSE reverted back to a positive operating cashflow (S$8m) in 1Q12 and lowered its net gearing to 30.4% (end Dec-11: 34.6%). Working through legacy projects CSE’s telecom division, which had encounter cost over-run issues in FY11, broke even during the quarter. The division also booked in S$9.0m of additional work (‘zero margin revenue’) for the legacy projects. Management expects a similar figure in 2Q12 and lower amounts in 2H12. As it works through the outstanding projects and secures new projects at better margins, its gross margins should revert towards the typical 35-37% levels.

Improving outlook but rising costs exists With growth in Asia remaining the bright spark of the global economy, BTG’s revenue growth should persist over the next three quarters as consumer demand continues picking up. As of 1Q12, the number of its outlets has grown 19.9% YoY (+3.7% QoQ) to 554. While it faces rising cost pressures – especially as it maintains its expansion phase – we believe that the development of additional revenue streams via a greater network of stores and brand offerings will minimize the negative impacts. In addition, BTG should start to see some trickle down benefits from cost rationalization and economies of scale and scope.

Mixed performance and outlook CSE is seeing strong business activity in the Americas, mainly due to strong growth in the greenfield onshore work. However, as onshore work typically commands a lower margin, the group’s gross margin was dragged down by 2.2%. Outlook for Europe and Asia remains lackluster. In Australia, its latest acquisition – Astib Group – performed well with 1Q12 operating profit of S$2.1m (1Q11: S$0.5m).

Maintain HOLD While operating margins may seem depressed, it is typical of a company undergoing an expansion phase. However, we retain our confidence in management’s ability in controlling costs and highlight the general stability in gross profit margins, which indicates that BTG’s management is effective in their cost control initiatives i.e. inventory control, purchasing ability etc. With BTG’s

Upgrade to BUY Although CSE’s margins have yet to recover, we are now seeing improvements in its cashflows and gearing level. With the S$10.3m one-off gain from sale of eBworx shares, we also think there is a higher probability that the group will revert to a 4 Sct dividend for FY12.

3

OCBC Investment Research Market Pulse 14 May 2012

Upgrade to BUY with unchanged fair value estimate of S$0.80. (Chia Jiunyang) UOL Group: 1Q12 Upgrade to BUY

earnings

in

line

previously, mostly due to higher ASPs for Katong Regency. (Eli Lee) – Goodpack Limited: Cost controls working out

● 1Q12 mostly within expectations ● Good sales performances YTD ● Upgrade to BUY

● Revenue growth on new customers and higher prices ● Goodpack to finish FY12 well ● Sell-downs over after price correction

Earnings within expectations UOL reported 1Q12 PATMI of S$84.0m, down 63% YoY mostly due to reduced profits from the property development segment and from associates (after Nassim Park Residences’ TOP in 1Q11). This was broadly aligned with consensus and our estimates. 1Q12 top-line came in at S$297.7m, down 59% again mainly due to lower sales of development properties. Looking ahead, we would continue to see revenue recognition at Double Bay Residences, Waterbank, Terrene and Spottiswoode, while Archipelago is expected to come in over 2H12.

Decent set of results Goodpack reported a 4.2% YoY (-0.1% QoQ) increase in 3Q12 revenue to US$43.5m following increased contribution from its newlywon automotive business and higher prices charged on existing customers while a 1.5% YoY (+2.2% QoQ) reduction in logistic and handling costs pushed PATMI higher by 8.6% YoY (+8.0% YoY) to US$11.5m. Its 3Q12 revenue was within 0.6% of our projections but the earlier than anticipated inclusion of IBC leasing expenses caused our bottom-line to deviate by 27.2%. However, for the 9M12, Goodpack’s revenue and PATMI constituted 75.6% and 75.9% of our FY12 projections, falling within our overall expectations.

Sharp execution in the domestic residential segment We saw good execution at UOL’s two main projects – the Archipelago and Katong Regency. The 577-unit Archipelago, which was less than 20% sold as of end FY11, is now more than two-thirds sold at relatively stable price levels (~S$1.0-1.1k psf). In addition, we also saw a strong launch at the 244-unit Katong Regency which is now mostly sold out. In its overseas segment, management indicates that conditions in China remain challenging, and that take-up rates would likely stay subdued with existing purchasing curbs. For the Esplanade in Tianjin, UOL expects to first launch a limited number of condominium units to gauge feedback and gather interest.

Cost control initiatives paying off On the cost front, overall 3Q12 operating expenses have come off 12% YoY (-6.8% QoQ) to US$27.2m, which indicates the successful implementation of cost control initiatives by management. Although operating expenses are still higher on a 9M12 basis – due in part to the increase in IBC leasing expenses – we view this quarterly reduction as a positive step in improving operating margin and anticipate a further uptick in 4Q12. Last quarter to close out well Going forward, demand for Goodpack’s IBCs in 4Q12 should remain stable at current levels with support for their main revenue segments (the natural and synthetic rubber businesses) coming from the automotive industry as global motor sales maintain their upwards momentum. Coupled with management’s effective control over operating expenses, we expect Goodpack to close out FY12 on a good note.

Hotel numbers stay strong RevPar growth, on a blended basis across the portfolio, was around 16% YoY. 1Q12 revenue from the hotel ownership and operations segment increased 22% to S$96.8m, mostly due to the group’s hotels in Singapore, Australia, Malaysia and Yangon and the inclusion of revenues from ParkRoyal Melbourne Airport (acquired Apr 11).

Upgrade to HOLD on valuation grounds Following our 15 March take-profit call on Goodpack, the counter has since retreated by more than 13% and has since stabilized over the past two weeks. At this juncture, we view the sell-downs and profit-taking actions to be over, and Goodpack’s decent 3Q12 results

Upgrade to BUY Given limited land-bank, we believe UOL to be relatively sheltered from uncertainties in the domestic residential space ahead. The group’s balance sheet also remains healthy; cash is at S$334.2m and gearing at 33%. Upgrade to BUY with a marginally higher fair estimate of S$4.80 (30% RNAV discount), versus S$4.77

4

OCBC Investment Research Market Pulse 14 May 2012

could inspire some buyers to return on recent weakness. However, as its results were largely in-line with our expectations, we leave our FY12 and FY13 projections and corresponding fair value estimate of S$1.70 unchanged. Upgrade our rating to HOLD on valuation grounds. (Lim Siyi) SATS Ltd: Results in line with expectations SATS Ltd (SATS) this morning released its 4QFY12 and FY12 financial results that were mostly in line with market expectations. SATS’ FY12 PATMI came in at S$171m, or 2% higher than consensus estimate, even though revenue was 2% below the street’s estimate at S$1.7b. SATS’ FY12 revenue from continuing operations jumped 24% but PATMI tumbled 11%. For 4QFY12, revenue from continuing operations gained 8% to S$433m though PATMI fell 1% to S$50m. The fall in PATMI in 4QFY12 can be partially attributed to the discontinued operations, which contributed S$6m of PATMI in 4QFY11. We put our fair value estimate of S$2.43/share and Hold rating on SATS UNDER REVIEW, pending a briefing with management later today. (Eric Teo)

Swiber Holdings: expectations

1Q12

results

within

Swiber Holdings (Swiber) reported a 29.1% YoY rise in revenue to US$194.4m but saw a 10.6% fall in net profit to US$8.6m in 1Q12, accounting for 27.0% and 27.4% of our full year estimates, respectively. Gross profit margin increased from 16.2% in 1Q11 to 19.8% in 1Q12, but was lower on a sequential basis (4Q11: 21.0%). Current borrowings stood at US$372.8m with a cash balance of US$139.3m as at 31 Mar 2012. Meanwhile, the outstanding order book of about US$1.2b is expected to contribute to results over the next two years. Pending an analyst briefing in the afternoon, we put our Hold rating and fair value estimate of S$0.75 UNDER REVIEW. (Low Pei Han)

5

OCBC Investment Research Market Pulse 14 May 2012

Calendar of key events Mon 14-May-12

Tue 15-May-12

Wed 16-May-12

Thur 17-May-12

Fri 18-May-12

SATS 4Q12 ComfortDelgro/Swiber 1Q12 Sapphire 1Q12 (est)

US Apr CPI US Apr Advance Retail Sales SG Mar Retail Sales KSE 1Q12 Olam 2HFY12 Parkson Retail 3Q12 (est) MCT FY12 (est)

US Apr Housing Starts US Apr Industrial Production

US May Philadelphia Fed US Apr NODX Hong Leong Asia 1Q12 (est) CSE/ECS 1Q12 (est)

China April Property Prices TGR 4Q12 Global Yellow FY12 (est) CSE Global 1Q12 (est)

21-May-12

22-May-12

28-May-12

29-May-12

Tung Lok Rest FY12 (est) Tat Hong FY12

04-Jun-12

05-Jun-12

US Apr Factory Orders

US May ISM Non Mfg Composite

11-Jun-12

12-Jun-12

Notes:

23-May-12

24-May-12

25-May-12

US Apr New Home Sales US Apr CPI KSH/SSC FY12 (est) Bukit Sembawang FY12 (est)

US Apr Durable Gds Orders Cougar FY12 (est) Japan Foods FY12 (est) Hour Glass FY12 (est) Tiger Airways FY12 (est) AEC Education FY11 (est) Utd Envirotech FY12 (est)

US May U of Michigan conf US Apr Ind Production Ban Leong FY12 (est) Fischer Tech FY12 (est) Biosensors FY12 (est) Datapulse 3Q12 (est) Cortina FY12 (est)

30-May-12

31-May-12

01-Jun-12

Mclean 1Q12 (est) TT Intl FY12 (est) Sky One FY12 (est) Infinio/CPH FY12 (est) China Healthcare FY12 (est) Old Chang Kee FY11

US 1Q GDP SG Apr Bk Loans & Advances SG Apr M1 Money Supply

US May Chg in Nonfarm Payrolls US May Unemployment Rate US May ISM Mfg China May PMI Mfg

06-Jun-12

07-Jun-12

08-Jun-12 US Apr Trade Balance China May CPI (9th Jun) China May Ind Prod (9th Jun) China May Retail Sales (9th Jun) China May Exports (10th Jun)

13-Jun-12

14-Jun-12

15-Jun-12

US May Adv Retail Sales

US May CPI

US May Ind Production US Jun U of Michigan Con SG 1Q Unemployment Rate SG Apr Retail Sales

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.

6

OCBC Investment Research Market Pulse 14 May 2012

7

OCBC Investment Research Market Pulse 14 May 2012

SHAREHOLDING DECLARATION:

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

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 our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. 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. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd 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.

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 Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not 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 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, OIR’s 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%.

Co.Reg.no.: 198301152E

Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

8