IHH Healthcare - Strong Rebound Suggests Further Recovery

SG - IHH Healthcare - Strong rebound suggests further recovery

Strong rebound suggests further recovery

Immediate resistance conquered. IHH Healthcare could see more upside ahead after rebounding off its 5-month uptrend support and $1.55 support on significant trading volume yesterday; its 3-month downtrend resistance was also conquered at the same time.

Indicator turning bullish. The MACD has just rebounded off its centerline as well, suggesting that the upside momentum is building up again.

Next resistance at $1.70. The counter is likely to head towards the $1.70 immediate obstacle (psychological resistance) in the weeks ahead, with the next hurdle pegged at the $1.80 key peak.

Immediate support at $1.55. Meanwhile, we advocate a stop-loss exit at around $1.50, which is slightly below the firm support at $1.55.

Singapore Stock to Watch- Rex International Holdings

Rex To Raise $85.3m From Catalist IPO
Rex International Holdings, an exploration and production player, launched its initial public offering (IPO) on 22 July 2013 with a public offer of 2.5 million shares at $0.50 per share. Including over-allotment, the company expects to place out 168 million shares and raise proceeds up to $85.3 million. Debt free barring for a $2.4 million loan from a controlling shareholder, Rex will use most of the net IPO proceeds for active drilling programmes in the Middle East and Norway, as well as direct investments in new oil and gas opportunities and general working capital. Rex’s business is modeled to reduce its exposure to the expensive and time-consuming costs spanning from the acquisition of licences to exploration and development of oil wells. The Swedish oil and gas group essentially partakes in ventures with already secured exploration and production licences through utilisation of its leading-edge technology in exchange for an equity stake.

Significance: Rex plans to drill two offshore wells in its Oman concession later this year and the first well in each of its other two offshore concessions in the Middle East next year. Its recently started 80-well onshore drilling in the US, while in Norway it will drill three to five new offshore exploration wells as well as grow its licence portfolio. First oil production for its US assets in North Dakota is expected in 4Q13.

Singapore Stock Views - Thai Beverage Likely further correction after bearish break.

SG - Thai Beverage - Likely further correction after bearish break

Likely further correction after bearish break.

Key supports breached. Thai Beverage is likely to see more downside ahead after violating the lower boundary of its 1-year uptrend channel recently; this was followed by another bearish break of the $0.58 key support on heavy volume yesterday.

Indicator is bearish. The MACD has just initiated a sharp bearish crossover, suggesting that the downside momentum is building up.

Next key support at $0.50. The counter could possibly slip further towards the next key base at $0.50 (key trough) in the weeks ahead.

Immediate resistance at $0.58. Meanwhile, $0.58 is now the newly established support-turned-resistance.

Stocks to Watch - CapitaMall Trust; another promising quarter

CapitaMall Trust (CMT) reported DPU of 2.53 S cents, up 6.3% YoY. Together with 1Q DPU of 2.46 S cents, 1H13 DPU totaled 4.99 S cents (+6.6%), forming 50.9% of FY13F DPU. This is above our expectations given that a total of S$12.3m or c.0.36 S cents retained over 1H is available for distribution in 2H13. As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, up 0.9ppt QoQ, while positive rental reversion of 6.4% achieved in 1H was slightly higher than 1Q’s growth of 6.2%. CMT’s financial position also improved during the quarter, with gearing ratio down to 34.9% from 35.2% in 1Q. On 2 Jul, CMT redeemed all its outstanding convertible bonds due 2013, thereby fully addressing its refinancing needs for 2013. All 14 properties held directly by CMT, we note, are also unencumbered as a result. We now update our model to incorporate the better results and higher risk free rate assumptions. Consequently, our fair value eases from S$2.43 to S$2.35. However, given the strong upside potential, we maintain BUY on CMT.

Robust growth in 2Q13

CapitaMall Trust (CMT) reported a commendable 2Q13 scorecard last Friday. NPI grew by 12.2% YoY to S$125.6m, while distributable income to unitholders rose by 10.2% to S$87.7m. The completed asset enhancement works at JCube, Bugis+ and The Atrium@Orchard last year, together with higher rental rates achieved from the portfolio’s new and renewed leases, were the key drivers for the quarter. DPU was up 6.3% YoY to 2.53 S cents and, together with 1Q DPU of 2.46 S cents, brings the 1H13 DPU to 4.99 S cents (+6.6%). This forms 50.9% of FY13F DPU, above our expectations given that a total of S$12.3m or c.0.36 S cents retained over 1H is available for distribution in 2H13.

Continued strong execution

As at 30 Jun, CMT’s portfolio occupancy stood at 99.1%, up 0.9ppt QoQ due to significantly improved occupancy rates at Plaza Singapura and The Atrium@Orchard. Positive rental reversion of 6.4% was also achieved in 1H, slightly higher than 1Q’s growth of 6.2%. In addition, underlying fundamentals remained sound, with 1H13 shopper traffic and tenants’ sales rising 4.8% and 3.3% YoY respectively. For the rest of 2013, we note that only 11.9% of leases by rental income is left for renewal. This reflects CMT’s continued strong execution in our view.

Maintain BUY

CMT’s financial position also improved during the quarter, with gearing ratio down to 34.9% from 35.2% in 1Q. This is boosted mainly by an asset revaluation gain of S$104.0m arising from a 15bps compression of cap rates at several of its malls. On 2 Jul, CMT redeemed all its outstanding convertible bonds due 2013, thereby fully addressing its refinancing needs for 2013 and releasing The Atrium@Orchard from legal mortgage. All 14 properties held directly by CMT, we note, are unencumbered as a result. We now update our model to incorporate the better results and higher risk free rate assumptions. Consequently, our fair value eases from S$2.43 to S$2.35. However, given the strong upside potential, we maintain BUY on CMT.