Daily Review 09 July 2013

LIM & TAN SECURITIES PTE LTD 20 CECIL STREET #09-00 EQUITY PLAZA SINGAPORE 049705 TEL: 65330595 FAX: 65332368 www.limtan.com.sg RCB Reg No. 197301030W

FINANCIAL MARKETS

Shares in the US (S&P500: +0.53%; NASDAQ:

+0.16%) climbed again overnight, on optimism that corporate earnings would be bolstered by the ongoing recovery in the domestic economy. In particular, Alcoa, the biggest U.S aluminum producer, reported better-than-expected quarterly profits after market closed, as U.S carmakers used more aluminum in their latest models.

The recent spike up in Singapore 10-Year Bond Yield

to 2.63% (and the consequential impact on the high yield names) and funds outflows from Asian markets as a whole, are likely to have caused the decoupling between Singapore equities and positive leads from overnight markets. Thereby, we remain vigilant on the (1) regional funds flows data in Asia and (2) currency movements which could give us indications of the near term market directions.

Daily Review, 09 July 2013

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SINGAPORE NEWS SNIPPETS

Global Logistic Properties announced that it would

be developing a new logistic facility of approximately 110,000 square meters in the Japanese city of Nishinomiya, Hyogo Prefecture in Greater Osaka. The development is expected to be completed by June 2015 and cost an estimated 15.7 billion yen (S$199 million).

OCBCs Chief Executive Officer Samuel Tsien citied

liquidity prudency in doing banking business in China to weather any future crises, following the Chinese short term credit crunch seen in mid-June. OCBCs business in Greater China (including mainland, Taiwan and Hong Kong) accounts for approximately 7.2% of its profits before tax in 2012. We remain comfortable with OCBCs expansion plans over in the North Asian region, given its focus in lending to state-owned enterprises and strong liquidity (with its yuans loans to deposit ratio at less than 50%).

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MARKET STRATEGY
2Q13 Earnings Preview

Going into the 2Q13 earnings reporting season in

Singapore, we believe that 2Q13 profits are likely to remain relatively subdued, given the seasonal weakness in 2Q13 earnings, negative bearings of lackluster commodity prices (such as crude palm oil (-0.2% ) and crude oil (-7.1%) during the quarter) on plantation companies, commodity traders and oil-rig builders, as well as impact of the depreciating Indian rupee (-6.2%) and Australian dollar (-10.4%) relative to the Singapore dollar on Singapore-listed companies which has exposure in these countries such as SingTel. ongoing cooling residential property measures on real estate developers listed in Singapore, negative impact of volatile capital markets during the quarter on the financial sector with the likes of banks, as well as effects of the Chinese economic slowdown on stocks with China exposure and the gaming sector (which depends on PRC tourists visitations). for the Singapore market (on an aggregate basis) has been downgraded from 2.1% (in Mar 13) to 0.5% (in Jun 13) for FY13. Likewise, FY14s EPS growth numbers has been revised slightly downwards from 9.3% to 9.1% over the same period. This reflects the lack of conviction for Singapore corporate earnings overall, amid ongoing worries about the concerns cited above.

Against

the backdrop of muted EPS growth expectations for 2Q13, we believe that investors would be more focused on company guidance and outlook statements made by corporates in this impending profits reporting period.

Over the longer term, we remain positive on the

Also, we expect to see the consequences of the

Singapore equities markets, in anticipation of a more broad-based recovery in the U.S economy. In this environment, we continue to have a strong preference for the banking sector with the likes of DBS Group and UOB, in view that they would be able to benefit from the prospects of rising (short-end) interest rates over an extended timeframe, as we undergo a transition period from a low interest rate environment to one with higher interest rates, amid an improving U.S macro picture. in Japan could bolster property prices over the long run. Stocks such as Croesus Retail Trust and Global Logistic Properties are expected to be major beneficiaries as real estate owners in Japan. domestic consumption story would continue to gain traction. Within the Singapore-listed space, we like Thai Beverage Pcl for its cheap valuations (consensus FY 14 P/E of 16.6X) relative to its peers, and solid earnings growth going into next year (consensus FY14 EPS growth : +18.9%).

In addition, we believe that the asset reflation story

As seen in Exhibit 1, consensus EPS growth forecast

Similarly, we hold the conviction that the ASEAN

Exhibit 1: Consensus EPS Growth Forecast for FY 2013 and FY 2014

Source: Datastream; IBES

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ALLIED MATERIALS / UMS HOLDINGS

S$0.51-USMH SP

Applied Materials (AMAT), UMSHs largest customer

said that the industry spending on semiconductor equipment will pick up next year as chip makers boost output to meet demand for mobile device components.

This should drive AMATs sales up 22% to US$9.5bln and profit to double to US$1.4bln for 2014. (2014) although in the near term the company could see flattish yoy bottom-line performance due to flat demand from AMAT. decent support.

This should bode well for UMS in the longer term

According to AMAT, competition among smart-phone

producers is driving up demand for more advanced parts and improvement in the equipment that make them.

Notwithstanding this, UMSs 10% yield should provide We do not have a rating on the stock.

The continued strong demand for tablets and smart-

phones will result in their customers upgrading their equipment and hence would benefit AMAT.

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RESEARCH DISCLAIMER
This report is intended for clients of Lim & Tan Securities Pte Ltd [herein after termed as LTS] only and no part of this document may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) re-distributed or disseminated, directly or indirectly, to any other person in whole or in part, for any purpose without the prior consent of LTS. This research report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any specific recipient of this research report. You should independently evaluate particular investments and consult your independent financial adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report. The information, tools and material presented herein this report are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation or which would subject LTS to any registration or licensing requirement within such jurisdiction. The information and opinions presented in this research report have been obtained or derived from sources believed by LTS to be reliable. Their accuracy, completeness or correctness is, however, not guaranteed. Opinions and views expressed in this report are subject to change without notice, and no part of this publication is to be construed as an offer, or solicitation of an offer to buy or sell securities, futures, options or other financial instruments or to provide investment advice or services. Therefore, LTS accepts no liability for loss arising from the use of the material presented in this report where permitted by law and/or regulation. LTS may have issued other reports that are inconsistent with the assumptions, views and analytical methods of the analysts who prepared them. LTS, its directors, its connected persons and employees may, from time to time, own or have positions in any of the securities mentioned or referred to in this report or any securities related thereto and may from time to time add to or dispose of or may be materially interested in any such securities. LTSs research director or analyst is primarily responsible for the content of this report, in part or in whole, and certifies that the views about the companies expressed in this report accurately reflect his personal views. LTS prohibits the research director or analyst who prepares this report from receiving any compensation (excluding salary and bonuses) or other incentives and benefits receivable in respect of this report or for providing specific recommendation for, or in view of a particular company or companies mentioned in this report. LTS-SPECIFIC / REGULATORY DISCLOSURE 1. LTS does have a proprietary position in OCBC as recommended in this report as at the close of 08/07/ 13. 2. The research analysts do hold *interest in Croesus Retail Trust, Thai Beverage Pcl, UMSH and SingTel as recommended in this report as at the close of 08/07/13.
* Includes direct or indirect ownership of securities or Futures Contracts (excluding the amount of securities or Futures Contracts owned), directorships or trustee positions.

Daily Review, 09 July 2013

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