SGX on CapitaLand Hospitality

While visitor arrivals increased by 6.4% in 1Q13, gross lettings for 1Q13 grew by only ~2.8% to 2.8m room nights. This means that on a per capita basis, visitor arrivals are converting into fewer room nights, continuing a trend we note for 2012. With regard to the haze, we understand from an industry source that hotel bookings are not being negatively affected just yet. However, we think a blip in hotel performance through 3Q13 is likely given that the haze could last at least several weeks. Keeping in mind the mild oversupply situation for hotels we see building up, we remain NEUTRAL on the hospitality sector. We prefer Global Premium Hotels [BUY, FV: S$0.33], a longer-term asset value play in the Economy and Mid-tier space. (Sarah Ong) Mapletree Logistics Trust: Scaling up presence in Korea Mapletree Logistics Trust (MLT) has entered into a sale and purchase agreement with supply chain management company, Oakline Co. Ltd, for the acquisition of The Box Centre in South Korea. Oakline will lease back the property for a period of six years with built-in rental escalation from second year onwards. At a purchase consideration of KRW28.75b (~S$32.0m), the property is expected to provide an initial NPI yield of 8.4%. Management expects to fund the acquisition fully by debt, which is expected to increase its aggregate leverage marginally from 34.1% as at 31 Mar to 34.6%. This is likely to add ~0.03 S cents to FY14 DPU, based on our projections. We now factor in the acquisition into our forecasts, with the assumption that it will be completed in Jul. However, we reduce our fair value from S$1.34 to S$1.15 on higher cost of equity to reflect a higher risk-free rate, higher beta and reduced market risk appetite for interest-rate sensitive stocks. We maintain HOLD on MLT due to valuation grounds. (Kevin Tan) CapitaLand Limited: Top bid for Coronation site Yesterday evening, CapitaLand (CAPL) put in the top bid of S$366 million for a 99-year leasehold landed residential site at Coronation Road. The 37,441 sqm site is located within an established landed housing estate and enjoys good accessibility to Bukit Timah Rd and Pan Island Expressway. The GLS tender attracted 12 bids and CAPL's top bid was 17% higher than the second highest bidder - signaling the group's confidence in this project. We understand CAPL intends to develop a landed project comprising semi-detached and bungalows. We expect selling prices in the range of S$1.6k - S$1.8k psf and the project to accrete 1.3 - 2.2 S-cents to CAPL's RNAV. Pending the award of the site, we would keep our fair value estimate unchanged at S$4.29 (20% discount to RNAV). Maintain BUY. (Eli Lee)

NEWS HEADLINES - US stocks tumbled on Thurs, with the S&P 500 suffering its worst session since Nov 2011, hit by fear that the Federal Reserve will scale back its bond buying later this year. - South Korea's Lotte Shopping Co Ltd is looking to raise US$800m to US$1b by listing a REIT in Singapore as early as this year, according to IFR, a Thomson Reuters publication. - China's flash HSBC Purchasing Managers' Index for June dropped to a nine-month low yesterday, pointing to continuing weakness in local and external demand. - Armstrong Industrial Corporation Limited said that it has received a proposal from a consortium involving its major shareholder that may result in the delisting of the company. - Former Novena Holdings CEO Toh Soon Huat is leading a group of 17 investors, including a unit of mainboard-listed Serial System, to pump a total of S$15.04m into Jubilee Industries Holdings. - ISDN Holdings Limited plans to raise up to S$111.6m in gross proceeds from the issue and exercise of warrants. - Stamford Tyres Corporation posted an 18.5% rise in earnings for its full fiscal year ended April 30, boosted by a one-time gain from the sale of its stake in an associate.