Metro Holdings

8/14/2019 Metro Holdings

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Co. Reg No: 198700034EMICA (P): 056/11/2007

Singapore 30 June 2008

Morning BuzzKim Eng Research Team

US Indices

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Dow 11,346.51 -106.91Nasdaq 2,315.63 -5.74

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ADRsClose

Chartered 0.75

Creative 6.12

STI Chart

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Morning Bulletin 30 June 2008

Top Ideas

1) Metro Holdings Initiation (Gregory YAP 64321450)

Previous day closing price: $0.78Recommendation: BuyTarget price: $1.20

Initiate coverage with BUY and 12-month price target of $1.20Metro is undervalued relative to CapitaRetail China Trust (Singapores first retail China REIT).Our RNAV for Metro is $1.50, assuming the companys Mar 2008 valuation for its completedinvestment properties in Shanghai, Beijing and Guangzhou and JLLs capital values for BeijingGrade A office space and Prime retail space to value its properties under construction. Our pricetarget of $1.20 assumes a 20% discount to account for execution and market risks.

Greater openness should lead to better stock valueLong a conservative tight-lipped company, Metro has begun to be more communicative withinvestors, and recently held its first results briefing in many years. It has also appointed two newindependent directors and an external IR company. We expect the share price to respondpositively, which is critical to Metros ambitions to build up its property assets in China.

Now a long term property player in ChinaMetro is still better known at home as a retailer. However, it started to diversify into property inthe mid-1990s, when it invested heavily in China, and to-date, this is still not well appreciated byinvestors. With property rental income bringing in 70% of profits, the Metro of today is more aproperty player than a retailer and should be better valued, in our view. It has a high qualityportfolio of retail and commercial properties in Chinas top tier cities, strong financials, and

extensive retailing experience that partners (such as Shui On Land, Nan Fung and propertyinvestment funds HSBC NF and ECM) can tap on.

Recent fund raising points to greater heightsCash on hand of more than $173m as at Mar 2008, will be fortified further by a recently-announced $200m debt-raising exercise. While it has not detailed how it intends to use theproceeds, Metro is a savvy and well-connected property investor with an eye for good locations,and we believe it must have already identified some good investments in China althoughmanagement would only say that it is still preliminary.

Year End Dec 31 2005 2006 2007 2008F 2009F

Sales (S$ m) 5454 6944 8484 8940 9184

Pre-tax (S$ m) 2439 2750 3224 3276 3412

Net profit (S$ m) 1247 1504 1989 1587 1686

EPS (cents) 35.4 42.6 53.8 42.8 45.5

EPS growth (%) 34.4 20.3 26.4 -20.4 6.2

PER (x) 16.5 13.7 10.9 13.7 12.9

EV/EBITDA (x) 7.4 7.3 4.8 5.7 6.2

Yield (%) 1.0 1.1 6.3 1.7 2.2

* Net profit has been adjusted for exceptional gains and fair value adjustments for investment properties


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Price Chart

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Market / Corporate News

Keppel Fels Has completed the first of Ensco International's six new-

generation deepwater semi-submersibles, called the Ensco 8500 Series.These rigs, built at a cost of US$2.5bn, will form the backbone of Ensco'sdeepwater semi fleet in the future. Before this series, the company hasonly one deepwater semi, the Ensco 7500. KepFels, a unit of KeppelOffshore and Marine, has been Dallas-based oil major Ensco's preferredoffshore solutions provider over the past decade. It has been helpingEnsco build up and renew its rig fleet including the delivery of nine newjackup rigs. The Ensco 8500 Series of deepwater semis is an enhancedversion of the Ensco 7500, and is based on an Ensco proprietary design.They are capable of drilling in up to 8,500 feet of water, and can readily beupgraded to 10,000 feet water-depth capability if required. Enhancedfeatures include a two-million-pound quad derrick, offline pipe handling

capability, increased drilling capacity, greater variable deck load andimproved automatic-station-keeping ability.

OCBC Bank Wholly owned subsidiary, OCBC Bank (China) Ltd, willopen its second sub-branch, Shanghai Gardens, in Chengdu today. Inaddition, the bank's branches in Chengdu and Shanghai have receivedregulatory approval that allows the bank to offer renminbi-denominatedproducts to citizens in these two cities. OCBC China chairman Leong WaiLeng said that OCBC Bank has been in China for 83 years and it is thefirst foreign bank to be established in Chengdu. With regulatory approval tosell renminbi products to citizens in Chengdu and Shanghai, OCBC Chinawill progressively introduce mortgages, wealth management andinvestment products to serve the country's growing affluent population, MsLeong said. 'With 'family' as the main thrust of our retail strategy, the bankwill develop family-oriented products and services to help our customersprotect and grow their family wealth,' she said. Besides renminbi savingsand current accounts, fixed deposits, one-day or seven-day call deposits,structured deposit financial products and mortgages, the bank will alsooffer additional services such as foreign currency exchange andremittance, fund proof for applying student/business visa and offshorefinancial services.


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Morning Bulletin 30 June 2008Singapore Telecom Is raising its stake in associate Globe Telecom to47.34% from 44.47%. SingTel said that it will pay Ayala Corporation4,598m pesos ($140m), or 1,210 pesos per share, for 3.8m shares inGlobe, the second largest telco in the Philippines. According to Bloomberg,Ayala owned 33.3% of Globe before the deal. SingTel said that the pricewas arrived at on a willing-seller willing-buyer basis, taking into accountprojected future cash flows, comparables and the prevailing market price.On Thursday, the closing price of Globe on the Philippine Stock Exchangewas 1,185 pesos. SingTel bought its initial 44.47% stake in Globe in 1993for $882m. SingTel has said that its acquisition strategy is to raise stakesin associates or invest in new markets, focusing on Asia. For SingTel'sfinancial year ended March 31, 2008, Globe's pre-tax profit contribution tothe group rose 9.4% to $317m, benefiting from the 8% appreciation of thepeso. For the first quarter of 2008, Globe reported core net income of3.5bn pesos, down 4% as customers cut spending while struggling to copewith rising food and fuel prices. Globe president Gerardo.

CapitaCommercial Trust (CCT) Expects financing to become moreexpensive after it raised US$1.2bn to fund an acquisition of an office towerthis year. The manager of about 3m sq ft of commercial space inSingapore agreed in March to buy a 23-storey office block known as 1George Street in Singapore's business district for $1.17bn. The trust said itwill fund the acquisition with debt such as convertible bonds and medium-term notes. CapitaCommercial Trust's shares have fallen 21% this year onconcern that borrowing costs for the trust may rise, prompting Citigroup todowngrade the stock earlier this month. Asia's real estate funding costsare likely to remain high over the next 12 months after rising as much as700 basis points in the past year, Sameer Nayar, head of real estate

finance at Credit Suisse Group, said. CapitaCommercial said in April itplans to sell $280m of bonds, with an option to raise another $90m. It alsoissued $150m of medium term notes and took on loans for the acquisition.

Singapore Press Holdings SPHs Paragon shopping centre in OrchardRoad is now worth $2bn, about 10% up from its valuation of $1.82bn ayear ago. The higher valuation came amid higher rents and continuedstrong demand. Rents are firm and have been increasing since last June,with occupancy at 100%, said Lydia Sng, executive director of valuationsfor property consultancy Knight Frank, which carried out the latestvaluation. The earlier valuation of $1.82bn on June 28, 2007, was also

done by Knight Frank. The Paragon is undergoing a $45m makeover toupdate its facade and increase retail space. The renovation is slated forcompletion in October. SPH said earlier that the makeover was part of acontinuous effort to enhance the retail environment and shoppingexperience for Paragon customers. In addition, the commercial spaceabove its retail podium will be expanded - at a cost of $37m, including thepayment of land premium. This is scheduled to be completed by end-2008.The total cost of the facade makeover and the addition of commercialspace is $82m. Paragon remains open and operates as it normally doesduring the renovation period. SPH will be releasing its financial results forthe third quarter ended May 31, 2008, on July 11.

(Sources: Company, SGX, Business Times, Dow Jones)


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SINGAPOREStephanie WONG Head of ResearchRegional Head of Institutional Research+65 6432 1451 [email protected] Consumer Industrial Small/Mid CapsGregory YAP+65 6432 1450 [email protected] Technology & Manufacturing Telcos Transport & Logistics China ConsumerRohan SUPPIAH+65 6432 1455 [email protected] Oil & gas ConglomeratesPauline LEE+65 6432 1453 [email protected] Bank & Finance Retail Consumer

Wilson LIEW+65 6432 1454 [email protected] Property & Construction Hotel & ResortJohnny TEO+65 6432 1431 [email protected] Industrial InfrastructureDavid LOOMIS+65 6432 1417 [email protected] Special Situations

KELIVE SingaporeONG Seng Yeow Head of Research+65 6432 1832 [email protected] Chin Poh+65 6432 1859 [email protected] Han Peng+65 6432 1857 [email protected] EU+65 6432 1469 [email protected] TAI+65 6432 1412 [email protected]

HONG KONG / CHINAEdward FUNG+852 2268 0632 [email protected] Power ConstructionIvan CHEUNG+852 2268 0634 [email protected] PropertyIvan LI+852 2268 0641 [email protected] Bank & FinanceLarry GRACE+852 2268 0630 [email protected]

Oil & Gas EnergyShadow LAU+852 2268 0645 [email protected] Small CapsTAM Tsz Wang+852 2268 0636 [email protected] Small CapsEmily LEE+852 2268 0631 [email protected] Small Caps

MALAYSIAYEW Chee Yoon Head of Research+603 2141 1555 [email protected] Strategy Banks Telcos Property Shipping Oil & gas Gaming Media Power Construction Food & Beverage Manufacturing Plantations Tobacco Electronics

INDONESIAKatarina SETIAWAN Head of Research+6221 3983 1458 [email protected]

Consumer Infra Shipping Strategy Telcos OthersRicardo SILAEN+6281 3983 1455 [email protected] Auto Energy Heavy Equipment Property ResourcesTeguh SUNYOTO+6221 3983 1455 [email protected] Cement Construction Pharmaceutical RetailAdi N. WICAKSONO+6221 3983 1455 [email protected] GeneralistArwani PRANADJAYA+6221 3983 1455 [email protected] Technical analyst

PHILIPPINESEd BANCODHead of Research+63 2 849 8848 [email protected] Strategy BankingLaura DY-LIACCO+63 2 849 8843 [email protected] Utilities ConglomeratesLovell SARREAL+63 2 849 8871 [email protected]

Consumer Cement MediaRobin SARMIENTO+63 2 849 8831 [email protected] Ports MiningRicardo PUIG+63 2 849 8846 [email protected] Property Telcos

TAIWANKevin CHANGHead of Research+8862 2547 1512 [email protected]

Jack CHANG8862 2546 4965

[email protected] Non-TechJill HUANG8862 2546 4171

[email protected] PC / NotebookEric LIN8862 2546 [email protected] OpticalChialin LU8862 2714 [email protected] CommunicationsTess WANG8862 2719 8105

[email protected] Financial

THAILANDDavid BELLER+662 658 6300 x 4740 [email protected] Banks ShippingNaphat CHANTARASEREKUL+662 658 6300 x 4770 [email protected] EnergyPiya ORANRIKSUPHAK+662 658 6300 x 4710 [email protected] PropertySupattra KHONGRUNGPHAKORN+662 6586300 ext 4800 [email protected] Electronics Automotive TourismKanchan KHANIJOU+ 662 658 6300 x 4750 [email protected] Construction

KELIVE Thailand (for retail clients)George HUEBSCHHead of Research+662 658 6300 ext 1400 [email protected]

VIETNAMLE Huy Hoang+84 8 838 6636 x 160 [email protected]

Recommendation definitions

REGIONALLuz LORENZOEconomist+63 2 849 8836 [email protected] Economics

Our recommendation is basedon the following expected priceperformance within 12 months:

+15% and above: BUY

-15% to +15%: HOLD-15% or worse: SELL


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Morning Bulletin 30 June 2008TERMS FOR PROVISION OF REPORT

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Morning Bulletin 30 June 2008Additional information on mentioned securities is available on request.

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9/9

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Documents

Metro Holdings