CIMB PM Play the dual-listing theme wisely
China Gaoxian’s KDR debut opened lower this morning, with its KDR price falling to a low of 5,360 KRW (equivalent to S$0.307 per share) before recovering to 5,605 KRW as at writing. As a result, its SGX price fell from S$0.44 (yesterday’s closing price) to a low of S$0.36 (-18%) before finishing at S$0.365 at the break; stock’s KDR value effectively trades at a discount to its SGX value currently.
Our take on dual listing: Our review suggested that stocks dual-listed on Hong Kong generally trade at only slight premium (except for Novo Group; but unfortunately trading is inactive) to SGX prices. Thus, arbitraging may not be profitable for retail investors when transaction costs are factored in. In Taiwan however, TDRs generally trade at a premium to SGX prices. However, we think that the premium is sustained because (i) the Taiwan market trades at a premium to Singapore, and (ii) arbitrage opportunities for TDR are non-existent as they are not fungible. Though so, premium TDR valuations may still have the effect of lifting the companies’ SGX prices without eliminating the valuation gap.
For the investors: Make your investments based on company’s fundamentals; do not chase dual listing themes blindly. Current investors in China Gaoxian could take advantage of this opportunity to buy its KDR and sell SGX shares (in equivalent amount) to make the spread (+12% before transaction costs).
Trader’s perspective: China Gaoxian’s share price fell 5.6% (to close at S$0.42) on the next trading day after it announced KDR pricing (S$0.405 per share) at a discount to its last transacted price on the SGX (S$0.445 per share); as at noon, price has fallen 18% since announcing KDR price. Prior to this sell-down, its price rallied +134% from S$0.19 (last closing price before KDR plans was revealed) to S$0.445 (just before KDR pricing announced). Thus, we feel that traders playing the dual listing theme will be better off taking profits on announcement of dual listing offer price.
What to buy now? Companies (with good fundamentals) set for Korean listings but has NOT announced KDR pricings. In this space, we like Combine Will (Buy, TP S$0.52) and UMS Holdings (Pending results review: Buy, TP S$0.835).

GENTING Singapore Plc by CIMB

Quick takes - Junket regulations up the ante - by Joseph Wong Chin Wai CFA
(GENS SP / GENS.SI, OUTPERFORM - Maintained, S$2.15 - Tgt. S$2.70, Travel and Leisure)
--------------------------------------------------------------------------------
The Casino Regulatory Authority (CRA) has reportedly engaged Spectrum Gaming Group (SGG) to conduct background checks on several entities that have applied for junket licences since 2010. We take a negative view of this development as stringent checks could scare away junkets as they will need to pay higher-than-expected charges for such checks. Furthermore, the charges are not refundable if they fail the probity check. That said, we view this as a longer-term, rather than a near-term concern as we believe that the novelty effect of the IRs will continue to pull in the punters in the near term. This will allow RWS to nurture its higher-margin in-house VIP market by leveraging the Genting group's extensive clientele base. We retain our FY10-12 forecasts, SOP-based target price of S$2.70 and OUTPERFORM rating for Genting Singapore.

KIM ENG

Ascott Residence Trust - The "art" of diversification
(BUY, $1.22 - TP $1.38, ASRT.SI / ART SP, REITs)
Ascott Residence Trust (ART) reported a 58% YoY jump in revenue to $72.8m for 4Q10 due to the additional contribution from the 28 properties acquired in Oct 2010, in line with market and our expectations. Final DPU of 2.27 cts was declared. The buoyant demand in the hospitality industry especially in Singapore and United Kingdom will underpin revenue growth and our DPU forecast of 8.1 cts for FY11F. Maintain Buy with target price unchanged at $1.38.

IPO Highlights: XMH by SIAS

Main Activities: XMH is a Singapore-based distributor for a wide variety of marine and industrial diesel engines, power generating sets and related components. The company also provides customized products and services such as their in-house “e-Gen” power generating units and “XMH IPS” propulsion systems.

Source: SIAS Research EstimatesKey ratios (FY11F)
PER 7.0 P/BV 2.3
ROE 32.7%
Debt/Equity 15%
Current ratio 1.59Source:
SIAS Research EstimatesIPO DetailsNo. of Public Offer Shares1.5mNo. of Placement SharesFloat to PublicPlacement PriceNet IPO Proceeds to XMHLast Date of Application*Date of Trading*IPO Manager99.45m25.2%S$0.250S$18.85m24 January 2011, noon26 January 2011, 9amUnited Overseas Bank*Indicative timelineStock DetailsNumber of Shares*400 mMarket Capitalization*S$100 m


XMH Holdings Ltd. (XMH) is poised to list on the SGX Mainboard on 26 January 2011. 100.95m shares will be issued at S$0.25 each, representing 25.2% of the enlarged post-IPO shares capital. Our preliminary analysis reveals that the company has a stable business model and industry trends reflect a higher demand for XMH’s marine diesel engines. That said, our economic profit model indicates an intrinsic value of S$0.380, representing an upside of 52% over its IPO offering price of S$0.250.
Fundamental Drivers:
 Stable Business Model: Owing to the wide application of marine diesel engines and limited well-known brands within the industry, we believe that XMH operates in a steady business environment. This is further supported by their popular customized in-house products and strong customer following. 75.9% of FY2010 sales are attained from repeat clients.
 Firm Supplier Relationship: Thanks to XMH’s competent distribution network, the company was granted the exclusive distribution rights to a limited range of Mitsubishi brand of high speed and medium speed marine diesel engines and products in regions like Singapore, Indonesia and Maldives. Mitsubishi is one of the four globally renowned marine diesel engine brands and the firm supplier support provides XMH with an edge which competitors cannot replicate.
 Robust Growth Prospect: With the IPO proceeds, XMH can broaden its advantage against other peers by establishing an assembly line for their customized "e-Gen" power generating sets. This facility enables XMH to manufacture exclusive in-house components, shorten its lead time, ensure component quality and assemble more sophisticated products.
 Supportive Industry Catalysts: Indonesia’s demand for XMH’s marine diesel engines is likely to increase on the back of the execution of cabotage regulation, coupled with upcoming coal-fired power plant projects in Indonesia and escalating coal exports to China.

21 Jan 2011 14:42 CST DJ MARKET TALK: STI Off 0.4%; Volume Tepid; 3165 Support -DBSV
0642 GMT [Dow Jones] Singapore's STI is down 0.4% at 3192.60, with selling in banks, commodity plays and rig builders weighing on the index as caution prevails after yesterday's sharp fall. Volume falls from yesterday, and is at 1.01 billion shares so far. DBS Vickers strategist Yeo Kee Yan says "earnings season has a history of being choppy. Back in December I highlighted that the market should start to rise, but that profit-taking might kick in by mid-January, which is actually what's happening now. Ultimately I believe that corporate earnings will support the market for blue chips, so downside will be limited in the near term." Below 3200, he tips support at 3165. He adds, other than profit-taking, traders may also be paring down holdings ahead of the Lunar New Year holiday (Feb. 3). Noble (N21.SG) is down 1.3% at S$2.24, OCBC (O39.SG) is off 0.6% at S$9.94, Golden Agri (E5H.Sg) is down 2.0% at S$0.725, and Keppel (BN4.SG) is down 1.7% at S$11.30. (matthew.allen@dowjones.com)

CIMB PM
Tiger Airways: Stuck between a rock and a hard placeTough operating environment, steep valuations. We believe Tiger Airways could face a tough operating environment going forward. The budget carrier could face headwinds from i) Australian floods, ii) rising oil prices and iii) recovery from reputation loss. In addition, Tiger is trading at 9x CY12 P/E, in line with full service carriers. However, in view of its operational risks going forward, we believe that Tiger should be trading at a lower P/E multiple.Australian floods to impact growth. With almost 50% of its revenues derived from Australia, the existing floods will have near term and longer-term impact on Tiger. Around 30% of Tiger’s Australia route portfolio consists of flights to major airports in Queensland, including Brisbane, Mackay, Gold Coast and Sunshine Coast. Although Tiger will be able to reschedule their route portfolio and transfer capacity to other major airports, the flood will have longer term impacts on Australia’s economy. According to estimates, Australia could need three to five years to reconstruct decimated property and infrastructure in the wake of the floods, and economic growth could be stunted. We expect air travel demand growth to slow and competition between airlines could heighten. Domestic passenger fares could dip and margins could be squeezed going forward.Rising oil prices to add to Tiger’s woes. We expect margins to be squeezed in view of rising oil prices. Although we do note that Tiger engages in fuel hedging practices of 35-40% of total fuel requirement up to 15 months forward, a 1% increase in oil prices will still have a 3.7-4% decrease in EPS, according to our estimates.Steep valuations. At 9x CY12 P/E, Tiger is trading in line with full service carriers. However, in view of operational risks as well as a harsh operating environment going forward, Tiger Airways could see some weak earnings going forward. We believe Tiger should not be trading in line with well capitalized full service carriers, which have lower risk profiles.Recommendation. We have an Underperform recommendation with target price of S$1.59.

Interesting Article.. Fengshui by CLSA 2011

Some Fengshui masters predicted that Water industries will do well for 2011...

Rabbit year forecast
Renowned Feng Shui Master Lee Shing-chak presented to a full house at our annual CLSA 2011 Feng Shui Luncheon in Hong Kong. He views the rabbit as reserve, attentive, conservative, and
excitable. The stock market will be range bound with little opportunities to make large profits. The big risks this year could be bird flu, North Korean conflict and earthquake. Gold will do
well, but property will not. Market will improve in 2012 leading to a continue rally until recession in 2014-15. He likes entertainment, gaming, transports and tourism sector. Avoid property and construction. Stocks with the luckiest numbers are Yanzhou (1171 HK), NWD (17 HK), Cheung Kong (1 HK) and Tencent (700 HK).


What to buy? Markets, sectors, home prices, and gold
This will be a bouncy year for the market with no large rally or money making opportunities. Market will be weak in 1H, bottoming between May and August and should rally there-after. The best element this year is water which means movement. Thus, transport, logistic, and tourism sector will do well. The western direction is auspicious which means that entertainment including Macau gaming should also do well. He is also positive on gold which will go up to USD 1,600 - 1,800 oz by the end of the year. The best entry point would be mid-year. This is the year of metal which means that it is bad for the wood element. Property and construction will not do well.
Hong Kong property policies will follow Beijing and hence will cap property price. Property price will fall until mid-year and then rebound. Luxury will do better than mass market due to potential new policy. The best area in Hong Kong is Tai Koo Shing. Aberdeen could become a luxury market.

This is a good year for the dog sign as dogs always chase and out-runs the rabbit. People who are born in the year of the Monkey or Sheep will make the best investments this year.

Conclusion
As Chinese, we’re always interested in Feng Shui and what the heavens had to say. We may pay more attention this year than last as CLSA’s Feng Shui index was remarkably accurate last year. For real astrological advice we defer to Master Lee. He is forecasting a second half rally much like us, but we believe the rally could be stronger than he predicts. In terms of sector, we both agree on water (transports, tourism, logistics) and entertainment (Macau gaming). He is a buyer of gold, but not HK property. It really all sounds very sensible.
If you want to follow Master Lee, we provide stock suggestions for the sectors he likes:
􀂉 Transport – Air China (753.HK), China Merchants (144.HK), Cathay Pacific
􀂉 Tourism – Ctrip, Homes Inn
􀂉 Entertainment – Sands China (1928.HK), Wynn (1128.HK), SJM
􀂉 Gold – Zhaojin (1818.HK)

Lucky number 7 & 1 stocks – Stocks above and: Yanzhou Coal (1171.HK), New World Development (17.HK), Tencent (700.HK), Cheung Kong (1 HK), Want Want (151.HK), PetroChina (857.HK), China Telecom (728.HK)