Singapore Food Industries : 2Q06

Flat Performance But Yield Is Attractive. SFI 2Q06

Fu Yu 2Q06

Dismal Earnings Fu Yu 2Q06

Singapore Technical (31 Jul 06)

A potential breakout in the ST index towards 2520. Last Friday's price action in the US indices appear to mark a change in investor psychology. Both the S&P500 and the DOW have now retraced towards key resistance levels and if overnight highs are breached, then both indices could head up to retest recent highs. The fundamental catalyst is ironically data showing a slow down in US economy. Similar strength has been exhibited in Hong Kong where the HSI is now just only some 370 points away from the previous high. Over in Singapore, we were looking for a pullback from the 2420-2426 range. That did not materialise and there is no effective resistance until the 62% resistance level of 2520. Another way to look at the index is in terms of triangular breakout from the 2450 level. If this level crossses, which we assume it will, then the next projection target is 170 points from 2450 or approximately 2620. For now, 2520 would be our focus and that represents an almost 100 point upside from overnight closig. Stocks and Themes The primary beneficiary would most likely be interest rate sensitive property stocks and consumer plays. Property stocks Stocks such as Wing Tai, Ho Bee, Keppel land could head up towards $1.60, $1.00 and $4.30 respectively. Wing Tai in particular had corrected by roughly 33% from $2.00 to a low of $1.29. Ho Bee exhibits the strongest uptrend among the three stocks. REITS could also benefit from expectation of an end to US monetary tightening. Consumer plays China consumer plays like China Hongxing, Celestial Nutrifoods, Hongguo and China Sun are likely to rally sharply. Chart formations of all these stocks show volatility and volume contraction over the past 5 days. A set -up for volatility expansion is in place for these stocks. We feature the technicals for some of these stocks. 1. China HongXing- The stock has been drifting sideways between $1.60-1.50 over the past 4 days.Immediate trendline resistance is at $1.57. We expect the stock to break past that level and head towards prior high of $1.95. Recommend a buy at $1.54-1.56. 2. Celestial Nutrifoods- A break above $1.55 could bring the stock towards $1.80. Recommend a buy at $1.52-1.53. 3. Hongguo- Watch trendline resistance at $0.71. A break above that level could see the stock head over to $0.80-0.82 over a 1-2 week period. 4. China Sun - Daily chart is bullish and shows a lengthy consolidation pattern that is close to breaking out. Immediate resistance is at $0.86 and a break above that level could see the stock head towards $1.00. Recommend a buy at $0.84-0.86. Source: UOB Kay Hian

Regional Update (31 Jul 06)

CHINA Ping An (HOLD/HK$25.90) Buying 89.24% of SZCB for Rmb4.9b; small deal but big positive implication. China Water Affairs (BUY/HK$1.88/Target: HK$4.00) One-off share option expensing under new accounting rules led to bigger losses. But core business is robust. BUY on weakness. HONG KONG Peace Mark (BUY/HK$4.00/Target: HK$5.41) With post-results adjustment, Peace Mark remains the preferred partner for those who wish to enter the China market. BUY. Shaw Brothers (HK) (NOT RATED/HK$13.28) Regardless of the appraised value for Shaw Brothers, bidders may be willing to pay a premium for it in a bid to have a controlling stake in TVB. INDONESIA Sinar Mas Agro Resources (NOT RATED/Rp3,300) This plantation and cooking oil producer reported a sharp jump in interim earnings due to forex gain and higher CPO prices. MALAYSIA South Johor Economic Region PM announced that SJER will be developed into a metropolitan like Hong Kong and Shenzen. New South Johor Authority set up to oversee the development. Monetary Policy The OPR was left unchanged at 3.50% for the second consecutive month on the back of easing inflation and moderating economic growth. Banking 2Q06 data showed that auto loans led the slowdown in consumer loans while business loans rose. But asset quality improved with lower absolute NPL. SINGAPORE DBS Group Holdings (HOLD/S$18.20) Strong 2Q06 earnings yoy expansion is primarily due to increase in net interest income. SMRT Corporation (HOLD/S$1.08) Strength in MRT operations and rental income largely offset by weakness in taxi operations. Singapore Airlines (BUY/S$13.20/Target: S$15.00) 0 1QFY07 profit to increase 68% on padded earnings from building and aircraft sales in the quarter. Outlook improves if oil does not rise further. Property 2Q06: Recovery on track but no looming supply shortage to suggest rapid price increase. Sino-Environment Technology (BUY/S$0.995/Target: S$1.17) Positive plant visit to Fuzhou, China with momentum expected to continue. Our forecasts remain intact. BUY. Technical Potential move towards 2520 in the ST index. THAILAND Advanced Info Service (BUY/Bt87.00/Target: 101.39) Being awarded the licence to operate international call gateway may boost earnings next year. Maintain BUY. TALKING POINT: Pine Agritech (PAG.SP) - Stable Soy Prices Expected For more details, click on the link. Regional Update (28 Jul 06)

Regional Update (28 Jul 06)

CHINA Property The latest tightening tool: 20% capital gains tax will be enforced on secondary market residential transactions. China Shipping Container Lines (HOLD/HK$2.02) CSCL's earnings under severe pressure from difficult operating environment. We revised down its net profit forecasts for FY06 and FY07. Maintain HOLD. HONG KONG Hongkong Land (HOLD/US$3.98) 1H06: Net profit within expectations. Office rental cycle is likely to peak next year and we prefer Champion REIT for higher dividend yields. Tack Fat (BUY-Under Review/HK$0.94/Target: HK$1.11-Under Review) FY06: Net profit fell 14.7% yoy to HK$132.6m due to non-recurrent items. Current valuation looks fairly valued. INDONESIA Bank Rakyat Indonesia (NOT RATED/Rp4,275) 1H06: Consumer and small commercial loans pushed earnings up 3.4% qoq to Rp2,008b in 2Q06 while NPL remains under control at 5.6%. MALAYSIA Bursa (HOLD/RM6.05) 2Q06: Net profit increased 61% yoy. Star Publications (BUY/RM3.38/Target: R3.85) 1H06: Net profit of RM71.6m was within expectations. Revenue of RM354.8m was supported by the 5.7% adex rate hike in Jan 06. Berjaya Sports Toto (BUY ? Under Review / RM4.38/Target: RM4.60) B-Land repays another RM80m to BST as part settlement to its outstanding loan. Outstanding balance stood at RM478m as at 27 Jul 06. MMC Corp (BUY/RM3.28/Target Price: RM5.00) Weak 3QFY06 results (-33.4% yoy, -20.2% qoq) by associate Malakoff. Earnings to improve once Tanjung Bin power plant starts at end-Aug 06. SINGAPORE Keppel Corporation (BUY/S$15.40/Target: S$18.00) 1H06: Excellent performance. Apart from infrastructure, all divisions reported strong earnings growth. Our target price raised by 6% to S$18.00. Singapore Exchange (SELL/S$3.58/Fair: S$2.88) FY06: Net profit surged 79.8% on the back of the jump in stock market activity. We do not believe the strength can be sustained. STATS ChipPAC (SELL-Under Review /S$0.885/Fair: S$1.20-Under Review) 2Q06: Growth driven by communications sector due to increasing demand for 3D packaging. Pine Agritech (BUY/S$2.21/Target: S$2.80) Encouraging guidance from management affirmed our view about the growth prospects of Pine. MapletreeLog (HOLD/S$0.895) 2Q06: Achieved 7.2% higher qoq DPU, exceeding forecasts. THAILAND Thai Military Bank (HOLD/Bt3.38) FY06 earnings forecast is revised down by 11% on lower loans growth assumption while FY07 earnings estimate is cut by 23% on higher provisions. TALKING POINT: Jiangxi Copper (358.HK) - Copper prices at critical juncture For more details, click on the link. Regional Update (28 Jul 06)

Regional Update (27 Jul 06)

CHINA Finance State Statistical Bureau has added its voice to a growing body of opinion within the country that it should diversify US$ holdings. Good for gold. Technical Ping An (2318) - Money Management: Hold your stock until it falls below the 10-day moving average HONG KONG Real Interest Rate Low real interest rate benefits Hong Kong's asset market. HK Exchanges & Clearing (BUY/HK$49.35/Target: HK$57.80) Surge in 2Q06 earnings expected on back of strong market turnover. Technical OOIL (316) - Upper bollinger band penetrated. INDONESIA Snippet Bank Internasional Indonesia (NOT RATED/Rp175) 1H06: Another local bank owned by Temasek Holdings reports 11% yoy decline in net profit to Rp352b, attributed to significant provisions. Bank Mandiri (NOT RATED/Rp1,640) 1H06: Although net profit rose 32%, 2Q06 earnings fell 40% qoq. Its high 25% NPL remains a risk on future earnings. MALAYSIA Banking Falling used car prices to slowdown new car sales, thus lower auto loan growth with potential additional provision. NPL to impact banks' earning. Bumiputra-Commerce Holding (BUY/RM5.90/Target: RM7.20) Acquisition process completed, waiting for vesting order to merge balance sheet by Sep 06. Maintain 13% ROE target. Petronas Gas (BUY/ RM8.80/Target: RM10.00) Extending the length of its gas pipeline by 20% by 2010. Expect additional contribution of RM112m to earnings in FY11. No near-term earnings impact. SINGAPORE Jun 06 IPI IPI surged 22.5% in June on the back of a recovery in pharmaceuticals and resilient electronics, which should result in an upward revision of 2Q06 GDP. Jurong Technologies (BUY/S$1.04/target: S$1.74) Wireless accessories and new customers in consumer electronics and automotive industries provide new growth drivers. Venture Corporation (HOLD/S$9.80) Acquisition of GES adds ready customer base in POS systems. Expects room for rationalising combine manufacturing operations to create cost synergies. Keppel Land (BUY/S$3.66/Target: S$4.10-Under Review) 1H06: Group PATMI up 20.3% from 1H05 to S$80.6m. SembCorp Marine (BUY/S$3.36/Target: S$3.90) Brazilian associate Maua Jurong clinches US$550m fixed gas platform contract. Suntec REIT (BUY/S$1.19/Target: S$1.32) 3QFY06: Achieves 20.9% higher DPU, exceeding forecasts. THAILAND Siam Cement (HOLD/Bt216) 2Q06: Net profit fell short of expectation on Thai CRT asset impairment written off. Normalised profit of Bt7,554m was in line. Power Line Engineering (BUY/Bt7.15/Target: Bt11.95) Smooth progression for both Jungceylon and Bobae cases while Bann Aua Arthorn will support its growth momentum. Maintain BUY. TALKING POINT: THAILAND - Quality Houses (QH TB) For more details, click on the link. Regional Update (27 Jul 06)

Regional Update (26 Jul 06)

CHINA Property After weeks of speculation, new measures targeting at foreign investors were announced but these should have been largely discounted in the share price. HONG KONG Tax Reform Consultation of the proposed GST began last week. The government will probably need to make concessions to gain the necessary support. INDONESIA Bank Niaga (NOT RATED/Rp610) 1H06: Net profit of Rp353.5b (+14.9% yoy) despite strong interest income growth of 29.8%. Earnings dipped 0.6% qoq due to high interest rates. Bank Danamon (NOT RATED/Rp4,075) 1H06: Interim net profit fell 57% yoy to Rp558b in 1H06. High interest rates and inflation environment have caused a rapid deterioration in credit quality. MALAYSIA Cement Industries of Malaysia (BUY/RM2.30/Target: RM3.10) CIMA receives new offer from VICAT. This enhances its chances of a deal materializing. SINGAPORE United Test & Assembly Center (BUY/S$0.67/Target: S$0.94) 2Q06: Memory testing affected as Qimonda changed product mix from DRAM (outsource) to graphics RAM (tested in-house). Olam International (HOLD/S$1.27) Expiry of share sale moratorium could exert short-term share price weakness. CapitaCommercial Trust (HOLD/S$1.83) 4 1HFY06: Unitholders to receive 12% more distributable income backed by strong demand for quality office space. Fortune REIT (NOT RATED/HK$6.05) 1H06: FRT achieved 3.4% higher DPU. Technical Bear rally could end near 2420. THAILAND Advanced Info Service (BUY/Bt85.50/Target: Bt101) Cheap call tariffs improved subscriber base in 2Q06 but ARPUs went down. Improvement expected in the quarters ahead. TALKING POINT: Rimbunan Sawit (RSAW MK) - New Kid On The Block For more details, click on the link. Regional Update 26 Jul

Singapore Technicals

Bear rally could terminate near 2420. Exercise caution. Over the past 3 weeks, we had repeatedly stated that the corrective bear rally for the ST index was still intact despite sharp declines. Last week, we stated that the final leg of this 3 legged move could bring the index back to the 2400-2420 range. Since then market mood has improved somewhat and created the set-up for an advance to the said range. As of yesterday, the index had closed at 2407. Internal wave structure suggests that the index could advance further towards the 2420-2426 range. There is a cluster of Fibonacci resistance levels near this range. For example 38% retracement of the advance from 2666-2277 is at 2426. Our sell- set-up is as follows: If the ST index rallies towards the said range and retraces below yesterday's close of 2407 , we recommend a sell on the market. Else, hold. If the set-up pans out as expected, the index could correct back towards 2318 by early August with an eye on prior low of 2277 as an eventual target for the month of August. It is also worthwhile pointing out several divergences at this stage. Market volume for example has diverged as the ST index headed past 2390. Similarly most of the China small cap stocks are below their recent highs when the ST index was at 2390. All these suggests that we are not seeing a broad based rally but in all likelihood the terminal stages of a bear rally. Sectors 1. Property- The sector has underperformed significantly over the past 2 months. We had warned that property stocks were vulnearble a month ago and the recent correction attests to the weak technicals. Stocks such as Keppel Land and Wing Tai have corrected by roughtly 1/3 from recent highs. Keppel Land will be releasing its results later today. A failure to regain momentum would confirm that the downtrend is well established 2. Banks- The sector has been the best performing to date. DBS which corrected to a low of $16.30 in June had rebounded to $18.60 yesterday and covered a prior gap. The company will be releasing it's second quarter results on Friday. However given that the stock has already rallied ahead of the results, market players would most likely sell into news. 3. Small Caps- Most China related small caps have not rallied past the highs established 2 weeks ago and we also saw widespread correction yesterday. A failure to move past yesterday's high would create additional supply presure and stocks could resume the downtrend. 4. Tech Sector- Tech stocks have corrected sharply over the past 1 month, with key names such as Chartered Semi Conductor and UTAC loosing 30% or more of their values. This is not surprisingl as we have seen similar weakness in the NASDAQ Composite. Overall weakness is likely to persist and the sector will most likely underperform.

Regional Update (25 Jul 06)

CHINA China Gas (BUY/HK$1.29/Target: HK$1.70) FY06: Earnings growth will remain robust after earnings downgrade. Reiterate BUY with a lower target price of HK$1.70. HONG KONG YGM Trading (BUY/HK$7.25/Target: HK$9.40) We have set our 12-month target price to HK$9.40, representing 9x FY07 PE. Consumer stocks of similar sizes are trading at 10x -12x PE. VTech (BUY/HK$43.10/Target: HK$48.10) Sales of preschool toys in US remain robust. Major shareholder's unloading has no impact on the Group's performance. Maintain BUY. MALAYSIA Strategy PM to make announcement on SJER on 30 Jul 06. Significant policy changes could be introduced as SJER will be modelled after Hong Kong and Shenzen. SINGAPORE Singapore Post (BUY/S$1.04/Target/S$1.23) 1Q07: Retail segment surge contributed to the overall modest 5% net profit expansion. Property JTC expected to unveil Reit plans soon. Ascott Residence Trust (NOT RATED/S$1.08) ART reports first distribution - 11% higher than forecast. Makes its first acquisition of Somerset Olympic Tower in Tianjin Business District City Developments (HOLD/S$8.85) City Developments awarded Sentosa Cove's Quayside Collection. Macquarie MEAG Prime REIT (HOLD/S$0.94) MMP's 2Q06 DPU exceeds forecasts, posting 6.1% annualised yield. TALKING POINT: Century Sunshine (8276.HK) - Stronger fertilizer demand after flooding For more details, click on the link. Regional Update (25 Jul 06)