Company Highlights

Keppel Land: To develop condo in Sri Lanka. Keppel Land and Sri Lankan firm CT Properties have formed a JV to develop high-end condominium residences on a prime site in Colombo. The total development cost of the project is about S$70m. Keppel Land will take a 60% stake, while CT Properties will hold the other 40%. (Source: The Business Times) Comments: The move marks Keppel Land’s foray into the Sri Lankan property market. CT Properties is an established player in the Sri Lankan property market and has developed shopping malls, townships and high-end condominiums. Based on our 15% margin assumptions the overall contribution to Keppel Land’s RNAV is a negligible 1 S cent/share (<0.5%) to our current RNAV of S$4.78/share.

Jaya Holdings: Bags US$84m deals for two AHTS vessels. The latest jobs call for the building of two anchor handling tug and supply (AHTS) vessels by wholly-owned subsidiary Jaya Shipbuilding and Engineering. One involves the construction of a 16,000 brake horsepower (bhp) AHTS vessel, one of the largest being built by Jaya. The other is a smaller 5,150bhp AHTS vessel. (Source: The Business Times) JB Foods: Launches mainboard IPO.

M1: To beat rivals with a 4G first. M1 is set to
be the first operator with nationwide 4G smartphone and dongle coverage. The telco will launch 4G, or long-term evolution (LTE), services "towards the end of 3Q", it said. "New service plans will be announced at the same time," it added. (Source: The Business Times) Comments: New service plans for LTE / 4G services will be announced towards end -3Q12.

Nera Telecommunications: Net profit up 33% in 2Q12 to S$3.4m on higher turnover from both the telecom and infocomm business segments. Sales rose 16.7% to S$41.7m. The company has recommended a one-tier interim dividend of four cents per share. (Source: The Business Times)

SingTel: Wu Choy Peng tipped as the new CIO. Wu Choy Peng - once the Singapore government's chief information officer (CIO) - will fill the group CIO post at the telco from 6 August. Ms Wu will be going over to SingTel from Neptune Orient Lines, where she has been group CIO since 2006.

Singapore Banking:
Test of resilience – exposure to Europe.
DBS (BUY/S$14.12/Target: S$19.50)
OCBC (BUY/S$8.99/Target: S$11.75)
Exposure to Europe not significant. Europe is not a core market for Singapore banks. Their small exposure to Europe is centred at the UK, which is unavoidable as London is a financial hub with many global banks being headquartered there. Some banks have reviewed their interbank counter-parties and have rationalised their list to only top-notch names. Some Singaporean banks prefer to deal with global banks with a significant presence in Asia, such as HSBC and Standard Chartered, thus the increased exposure to the UK. Each bank has disclosed its exposure to country risk in a slightly different manner. Thus, we focus on comparing each bank’s exposure to Europe over time. Overall, Singapore banks’ exposure to Europe are mainly through interbank lending and government-related entities. Exposure to corporate loans is small. They are unlikely to impinge on the local banks in terms of asset quality. Relatively speaking, OCBC would be least affected by any fallout from Europe.

Re-iterate BUY on DBS and OCBC and maintain OVERWEIGHT. The Singapore economy stays resilient despite the sovereign debt crisis in Europe. Singapore banks’ asset quality remains healthy and unaffected by external turmoil. They are also extremely well capitalised. Singapore banks are plowing ahead with positive earnings growth despite challenging circumstances.