4/29/20104/29/20104/29/2010 29 April 2010

Morning Matters
While You Were Sleeping
Figure of the Day

US markets: Positive
Dow futures: +6 (as at 8am Singapore Time)

Tech is back on the back of strong demand
for laptops and mobile phones. See 'Scoop
of the Day'.
Key Market Indices
US wrap: The DJIA rose 53.28pts (+0.5%) to 11,045.27 while the S&P500
rose 0.7% to 1,191.36. U.S. stocks rose, rebounding from the biggest drop
since February, as higher than expected earnings and the Federal Reserve’s
pledge to keep interest rates at a record low overshadowed a downgrade of
Spain’s debt rating. Dow Chemical Co., the largest U.S. chemical maker,
climbed 5.9% and insulation producer Owens Corning Inc rallied 11% as
profits topped analysts forecasts. Goldman Sachs gained 2.6% after
defending its business practices to a Senate panel.
The Day Ahead…

Value Chg % Chg Market sentiment: Positive

STI resistance/support: 2972/2880
Dow Jones 11,045.27 +53.28 +0.48
S&P 500 1,191.36 +7.65 +0.65 Scoop of the Day: With recent news headlines depicting that a turnaround in
Nasdaq 2,471.73 +0.26 +0.01 the local technology sector is ongoing as electronics output in Singapore had
FTSE 100 5,586.61 -16.91 -0.30 jumped 73.8% YoY in March, we view this as an effect of the global economic
Nikkei 10,924.79 -287.87 -2.57 recovery that has whet consumers' appetite for new electronics devices such
Hang Seng 20,949.40 -312.39 -1.47
as PCs and smartphones. Coupled with the fact that most PCs are still using
Shanghai 2,900.33 -7.60 -0.26
HDDs rather than SSDs for memory storage purposes, we are thus positive on
KOSPI 1,733.91 -15.64 -0.89
2,932.04 -59.64 -1.99
this space and believe that the SGX-listed HDD-component manufacturers
STI
KLCI 1,333.17 -6.55 -0.49 would benefit accordingly. Favourites within our technology coverage list
include Armstrong (BUY, TP S$0.45), Adampak (BUY, TP S$0.31) and
Broadway (BUY, TP S$1.46). (James Lim)

Key Indicators WHAT’S INSIDE?

Value Chg % Chg

Analysing the News
Oil Price*
(US$/bbl) 83.22 +0.78 +0.95
Gold Price** Singapore Residential Price Index rose in 1Q10 (BT)
(US$/oz) 1165.70 -2.15 -0.18

US$/S$ 1.3736 -0.0001 -0.01

HP to be Palm's Silicon Valley savior in US$1B deal (AP)

Otto Marine: Issuance of S$100m 4.845% p.a. FRN (SGXnet)

* WTI Crude Future
** Gold Spot
SingTel sees boost from new TVRO offering (BT)

SingTel: Bharti Airtel’s 4QFY10 profit declined for the first time in three
years (BT)

On the Platter

Straits Asia Resources: Higher cost and lower ASP hurt 1QFY10
earnings (NEUTRAL, S$2.04, TP S$2.08)

Yangzijiang: Strong results as margins stayed strong (BUY, S$1.40, TP

S$1.80)
 29 April 2010
Insider Trade Highlights 28 Apr 10

Diary of Events

DMG Research
See important disclosures at the end of this publication 2
 29 April 2010
ANALYSING THE NEWS

Singapore Residential Price Index rose in 1Q10 (BT)

Brandon Lee (6232 3891, brandon.lee@dmgaps.com.sg)

The news: NUS’s Singapore Residential Price Index showed a 4.4% and 1.7% rise in 1Q10
non-landed property prices for completed projects in non-central and central locations
respectively. While non-central prices are already 6.4% above the last upcycle peak, central
prices remain 9.3% below.

Our thoughts. The price levels and trend of properties in the resale market is in line with those
exhibited within the primary market, where mass and mid projects are already beyond their
2Q08 peaks based on URA’s property indices. Capital values for high-end projects are 6.8%
off their 1Q08 peak. With the rebound in domestic/global economy, soft interest rates, entrance
of more foreign buyers and recent opening of IRs, we believe high-end prices still have room to
re-rate. We think policy risks and upcoming supply from government sites will cap price upside
for mass and mid segments. As such, we remain buyers of developers with reasonable high-
end exposure, i.e. CityDev (TP S$12.48), Wing Tai (TP S$2.15) and SC Global (TP S$2.26).

HP to be Palm's Silicon Valley savior in US$1B deal (AP)

James Lim (6232 3892, james.lim@dmgaps.com.sg)

The news: Palm Inc. – a pioneer in the smart phone business that couldn't quite make the
comeback it needed due to intense competition – has agreed to be bought out by Hewlett-
Packard Co. for about US$1 billion in cash. The two Silicon Valley companies announced
Wednesday that the deal will see HP pay US$5.70 for every Palm common share. HP hopes
Palm's webOS operating system will help it participate more aggressively in the fast-growing
market for Internet-connected mobile devices

Our thoughts: None of the stocks under our coverage have exposure to HP’s smartphone
business. While Hi-P International supplies handset accessories to Palm, we estimate that the
latter accounts for less than 10% of Hi-P’s total revenue. Moreover, although we have also
pointed out in our Hi-P initial coverage report during Sep 09 that several major PC OEMs
entering the smartphone space would heighten competition for the current players and margins
would be accordingly squeezed for its respective contract manufacturers, we note that Hi-P
may be less reliant on this area now as it is presently banking its fortunes on a new Apple PC
product, rumoured to be the iPad. Nevertheless, we are maintaining our NETURAL call and TP
of S$0.66 on Hi-P for now until its utilisation rates depict an improvement over the subsequent
quarters.

Otto Marine: Issuance of S$100m 4.845% p.a. Fixed Rate Note (SGXnet)
Jason Saw (6232 3871, jason.saw@dmgaps.com.sg)

The news: Otto Marine (OM) announced that it intends to issue S$100m 4.845% Fixed Rate
Notes (FRN) under the S$500m Medium Term Note (MTN) Programme. The minimum
denomination of the note will be S$250k and maturity date will be three years from the date of
issue. The closing date for subscription of the FRN is expected to be on or about 6 May 10.

Our thoughts: OM’s move to issue S$100m FRN has come shortly after the establishment of
the MTN Programme on 13 Apr 10. We view this positively as it will not only allow OM to
refinance its borrowings but will also provide it with ammunition to purchase more vessels for
its chartering operations as well as its subsidiary, Respect Geophysical, which offers seismic
information gathering services in the Asia-Pacific region. Given that governments, especially
those in Asia, are likely to raise interest rates in coming quarters in view of a fast recovering
economy, we believe it is timely for OM to raise funds through debt now. Maintain BUY with a
TP of S$0.64.

DMG Research
See important disclosures at the end of this publication 3
 29 April 2010
SingTel sees boost from new TVRO offering (BT)
Singapore Research (6533 0781, research@dmgaps.com.sg)

The news: New broadband-at-sea technology from SingTel could reach 10-20% of some
65,000 ships worldwide in three years, according to the executive vice-president of the telco's
Business Group, Bill Chang. SingTel’s new television receive-only (TVRO) broadband offering
- which recently scooped up the prestigious Seatrade Asia Award for Technical Innovation -
provides ships broadband connectivity at a download speed of 2 Mbps for US$1,999 a month.
The offering is a fraction of the price of other high-speed broadband offerings on the market,
which require heavy upfront capital investment in satellite broadband equipment, and ongoing
maintenance and manpower costs of up to US$120,000 per vessel. Mr Chang added that
SingTel is the only provider in Asia to use this technology, and probably the biggest company
worldwide to do so.

Our thoughts: Despite its monopoly position in several countries, SingTel is definitely not
slowing down on exploring new business opportunities. The latest effort to commercialise the
TVRO broadband offering by targeting seafarers showed the astuteness of the management
as offshore oil and gas exploration and production activities are on the rise, underpinned by the
increasing crude oil price and the gradual dry up of onshore oil and gas fields. While this is a
farsighted move, we believe that it will take time before the TVRO offering will make huge
impact on SingTel’s earnings. The key now is to establish its presence and brand name in this
particular field while other operators have not. Reiterating NEUTRAL on SingTel with TP of
S$2.98, NEUTRAL on StarHub with TP of S$2.20 and BUY on M1 with TP of S$2.55.

SingTel: Bharti Airtel’s 4QFY10 profit declined for the first time in three years (BT)
Singapore Research (6533 0781, research@dmgaps.com.sg)

The news: Bharti Airtel's first profit fall in three years puts more pressure on India's top mobile
operator to quickly integrate its US$9b purchase of Kuwaiti Zain's African assets to cope in a
cut-throat market. Its net income fell by 8% YoY to INR21b in 4QFY10 due to declining
margins. ARPU fell 28% YoY to INR220 in 4QFY10 while MOU also declined marginally by 4%
to 485min.

Our thoughts: The ultra-competitive market telecom market in India is taking a toll on even the
biggest mobile operator in India. As the metro circles are increasingly penetrated, operators
are increasingly resorting to predatory pricing to gain market share. In addition, more operators
are now entering to the less developed circles where spending power is lower. As a result,
ARPU of operators are likely to trend lower going forward. It will not be surprising to see
consolidation within the sector which will be beneficial to top operators like Bharti Airtel.
Reiterating NEUTRAL on SingTel with TP of S$2.98

DMG Research
See important disclosures at the end of this publication 4
 29 April 2010
ON THE PLATTER

Straits Asia Resources: Higher cost and lower ASP hurt 1QFY10 earnings (NEUTRAL,
S$2.04, TP S$2.08)
Joshua Low (6232 3884, joshua.low@dmgaps.com.sg)

A 68% YoY plunge in 1QFY10 earnings was in line with our expectations. Earnings fell to
US$11.2m largely due to higher costs, which consisted of (1) removal of overburden in
Sebuku, (2) a 60% YoY increase in fuel prices, and (3) higher loading costs in Jembayan.
Earnings are expected to improve over the next few quarters. We maintain our FY10 earnings
forecast as it remains in line, in our view. We maintain NEUTRAL, with DCF-derived target
price ofS$2.08, implying a FY11 P/E of 11.4x.

Expecting on-time approval for Northern Leases permit. During SAR’s 1QFY10 results
briefing, management remained hopeful that permit approval will be obtained by 3Q10.
Indonesia’s forestry department is expected to send a team to Sebuku next week for final
assessments, and drilling for the Northern Leases is targeted to start by the end of 2010. We
have factored in
on-time approval for the Northern Leases permit in our earnings assumptions.

Rising coal prices may pose earnings upside risk. FY10 coal ASP was guided to be high
US$60/tonne to mid US$70/tonne when prices were ~high US$80/tonne earlier this year. As
30% of SAR’s FY10 coal production is index priced and 10% is pegged to the spot market, we
think that there could be potential earnings upside risk as coal prices have now reached
~US$100/tonne. We believe it is possible coal prices remain this high throughout the year if
demand remains strong. In our sensitivity analysis, a 5% increase in both Sebuku and
Jembayan coal ASP will increase our target price by 20% to S$2.49.

New second loader for Jembayan to start construction by end 2Q10. The new loader will
cost ~US$20m to build, and this has already been factored in our forecasts. It is expected to be
up and running before the end of 2010. The previous dismantled line 2 loader had a capacity of
~5.5m tonnes pa. Jembayan’s current line 1 loader capacity has reached ~6.5m tonnes pa,
and we think that the new line 2 loader could possibly reach ~6.5m tonnes pa as well, should
further improvements be made to it.

DMG Research
See important disclosures at the end of this publication 5
 29 April 2010
Yangzijiang: Strong results as margins stayed strong (BUY, S$1.40, TP S$1.80)
Jason Saw (6232 3871, jason.saw@dmgaps.com.sg)

1Q10 results in-line with expectation. YZJ’s 1Q10 net profit of RMB586m (+21% YoY, -9%
QoQ) was in-line with ours and consensus expectation. In the latest analyst briefing, we
sensed increase optimism from management on new orders, and vessel deliveries are now
being accelerated. We re-iterate our BUY rating on the stock with an unchanged target price of
S$1.80 based on 15x FY10 P/E. Re-rating catalysts are: (1) rebound in global ship orders; (2)
acceleration of new income stream from ship-breaking; and (3) start-up of offshore marine unit.

High margins on old orders. Key takeaways from the results: (1) 1Q10 revenue grew 28%
YoY to RMB2.7b; 70% of revenue came from multi-purpose cargo ships and 30% from
containerships. (2) EBIT margin was strong at 23% vs. 21% in FY09 and 20% in FY08. The
high margin is mainly attributed to old orders. Management has guided lower margins of 15%
over the long run. In our earnings model, we assumed 18% EBIT margin, which is conservative
but necessary, as we see risks from rising steel prices and potential appreciation of the RMB.
(3) Net cash of RMB6.6b is equivalent to S$0.36/share.

US$5.45b order book provides high earnings visibility. YTD FY10, YZJ secured US$196m
orders for six 45,000DWT multi-purpose bulkers and one 92,500DWT multi-purpose bulker.
This lifted backlog orders to US$5.45b, with deliveries extending up to 2012. YZJ’s high order
book level (3.5x FY09 revenue) provides strong earnings visibility for the next two years.
Recent industry data points reinforced our view that ship orders are back: latest data from the
Ministry for Knowledge Economy (South Korea) shows that Korean shipyards secured
US$2.4b new orders vs. US$670m in the same period last year.

Acquisition of PPLH encountered unexpected resistance. Sembcorp Marine (SMM) has

sent a notice to Baker Tech and YZJ, indicating that SMM has first right of refusal to the 15%
stake in PPL Shipyard belonging to Baker. Management is waiting for Baker and SMM to reach
an amicable solution on that matter and did not rule out looking elsewhere to find a partner to
enter the offshore marine market. We are surprised to learn that Baker’s 15% stake comes with
50% board seats and 100% management right and believe that is the main reason behind the
resistance from SMM. The outcome of the deal has no impact on our forecast as no offshore
earnings have been factored into our model.

DMG Research
See important disclosures at the end of this publication 6
 29 April 2010
INSIDER TRADES HIGHLIGHTS FOR 28 Apr 10

Share Price % Stake before % Stake after

Company Insider No. of Shares
(S$) transaction transaction
Purchase
CHALLENGER TECHNOLOGIES LTD Loo Leong Thye 100,000 0.370 43.59 43.64
CITY DEVELOPMENTS LIMITED Credit Suisse Group AG 230,000 na 15.98 16.00
LEEDEN LIMITED Goh Khoon Lim 100,000 na 7.10 7.16
MEDIARING LTD Dato' Chuah Seong Ling 102,840,466 na 0.00 7.50
PARKWAY HLDGS LTD Fortis Global Healthcare (Mauritius) Limited 150,000 3.305 25.11 25.12
PUBLIC BANK BERHAD Employees Provident Fund Board 1,752,100 na 15.82 15.87
SAIZEN REAL ESTATE INV TRUST Arnold Ip Tin Chee# 500,000 0.080 1.24 1.30
SUNTEC REAL ESTATE INV TRUST Lim Hwee Chiang 3,868,851 na 1.92 2.13
VENTURE CORPORATION LIMITED Invesco Hong Kong Limited 226,000 na 6.96 7.04
HOTUNG INVESTMENT HLDGS LTD Share Buy-Back 1,068,000 na na 0.28
Sale
CH OFFSHORE LTD Scomi Marine Services Pte Ltd 205,000,000 na 29.07 0.00
CHINA HONGXING SPORTS LIMITED The Overlook Partners' Fund L.P 21,526,000 0.150 6.00 5.23
FU YU CORPORATION LTD Lui Choon Hay 488,000 na 12.84 12.77
POPULAR HOLDINGS LIMITED World Holdings (Pte) Limited 688,000 na 56.12 56.04

# Exercise of Rights issue / Share Options / Convertibles / Warrants / Share Issuance.

## Married deal.

DIARY OF EVENTS

26-Apr 27-Apr 28-Apr 29-Apr 30-Apr

US Data US Data US Data US Data US Data
Consumer Confidence (Apr) ABC Consumer Confidence (Apr 25) Initial Jobless Claims (Apr 24) GDP (QoQ)
MBA Mortgage Applications (Apr 23) Continuing Claims (Apr 17) Personal Consumption (1Q)
GDP Price Index (1Q)
Employment Cost Index (1Q)
U. of Michigan Confidence (Apr)
Chicago Purchasing Manager (Apr)
SG Data SG Data SG Data SG Data SG Data
Industrial Production (Mar) Money Supply M1 & M2 (Mar)
Bank Loans & Advances (Mar)
Credit Card Billings & Bad Debts (Mar)
SG Results SG Results SG Results SG Results SG Results
China Merchants (1Q10) Broadway Industrial (1Q10) Del Monte Pacific (1Q10) Ascendas India Trust (FY10) Ascott Residence Trust (1Q10)
Rickmers Maritime (1Q10) QAF (1Q10) Cheung Woh Technologies (FY10) CDL Hospitality (1Q10)
Starhill Global REIT (1Q10) MCL Land (1Q10) Fuxing China (1Q10)
Venture Corp (1Q10) Indofood Agri Resources (1Q10)
SMRT (FY10)
Tuan Sing Holdings (1Q10)
3-May 4-May 5-May 6-May 7-May
US Data US Data US Data US Data US Data
Leading Indicators (Mar) Factory Orders (Mar) ABC Consumer Confidence (May 2) Initial Jobless Claims (May 1) Unemployment Rate (Apr)
Pending Home Sales (Mar) MBA Mortgage Applications (Apr 30) Continuing Claims (Apr 24) Change in Nonfarm Payrolls (Apr)
SG Data SG Data SG Data SG Data SG Data
Purchasing Managers Index (Apr) Automobile COE Open Bid Cat A (May 5) Foreign Reserves (Apr)
Electronics Sector Index (Apr) Automobile COE Open Bid Cat B (May 5)
Automobile COE Open Bid Cat E (May 5)
SG Results SG Results SG Results SG Results SG Results
Great Eastern (1Q10) Singapore Airport Terminal Services (FY10) Lippo Mapletree REIT (1Q10) DBS Group (1Q10)
StarHub (1Q10) SembCorp Marine (1Q10)
UOI (1Q10) UOB (1Q10)
10-May 11-May 12-May 13-May 14-May
US Data US Data US Data US Data US Data
Consumer Credit (Mar) Wholesale Inventories (Mar) ABC Consumer Confidence (May 9) Monthly Budget Statement (Apr) Advance Retail Sales (Apr)
MBA Mortgage Applications (May 7) Import Price Index (Apr) Retail Sales (Apr)
Trade Balance (Mar) Initial Jobless Claims (May 8) Industrial Production (Apr)
Continuing Claims (May 1) U. of Michigan Confidence (May)
Business Inventories (Mar)
SG Data SG Data SG Data SG Data SG Data
Retail Sales (Mar)

SG Results SG Results SG Results SG Results SG Results

SembCorp Industries Ellipsiz Fraser and Neave Tiger Airways NOL
CSE Global Vicom ASL Marine Kian Ann Engineering SIA Engineering
FJ Benjamin Eastern Asia Technology GuocoLeisure Asia Pacific Breweries ComfortDelgro Corp
HTL International WBL Corp
Hotel Royal SingTel
City Developments

DMG Research
See important disclosures at the end of this publication 7
 29 April 2010

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

This research is for general distribution. It does not have any regard to the specific investment objectives, financial situation and particular needs of
any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial
adviser before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this
report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty
nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to
change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities, DMGAPS and its affiliates, their
directors, connected person and employees may from time to time have interest and/or underwriting commitment in the securities mentioned in this
report.

DMG & Partners Securities Pte Ltd is a joint venture between OSK Securities Berhad (a subsidiary of OSK Investment Bank Berhad) and Deutsche
Asia Pacific Holdings Pte Ltd (a subsidiary of Deutsche Bank Group). DMG & Partners Securities Pte Ltd is a Member of the Singapore Exchange
Securities Trading Limited.

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DMG Research
See important disclosures at the end of this publication 8