YANGZIJIANG

There was no month-end dressing in last 2 days and going by
today’s continued fall, YZJ is going the opposite of its behaviour at
end-Sept and early Oct when a sustainable breakout took it from
around $1.80 to a high of $2.86 on Oct 2. This was followed by a
minor new peak of $2.87 in mid-October.

It was still doing alright after that peak until a heavy volume day on
Oct 30 on 130.8m shares the highest turnover since debut on April
18 (462m shares changed hands), put pressure on the stock.
Nevertheless, it managed to find support at $2.50 and some residual
selling yesterday and today brought the stock to the next $2.43-45
support today.

It is not as if YZJ has failed to penetrate new highs above $2.86-87
with no significant top formation there to justify a shakeout. It was
different though early last month as the surge from 41.80 to $2.86
made it justifiable for an 18.5% correction to a low of $2.33 on Oct 4,
2 days after peaking at $2.86.

Despite this big correction, the counter has stayed well above the
lowest bollinger band (at $2.46) which it is now closing in.
In fact only once on Aug 17 when the STI was floored to as low as
2962 that YZJ fell below the band which has never happened since
April 18 debut. In addition, the close of $2.43 on Oct 4 when it hit
$2.33 should be a pacifier for those concerned about a break of
$2.43-45 support.

On top of that the counter also rebounded strongly to close at $2.68
on Oct 17 after it fell to $2.43 and again on Oct 22 when its low was
$2.49 it finished at $2.58. Now that it is back to below $2.50 at the
low end of October’s $2.33-$2.87, buying on weakness below $2.50
appears appropriate.

Banking Sector

Sep-07 stats: Stunning loan growth of 12.8% y-o-y
􀂾 The system loan growth in Sep-07 swelled to 12.8% y-o-y
and 4.6% q-o-q in Jul-Sep quarter, compared to 10.8% y-o-y and
4.9% q-o-q in Jun-Aug quarter. This is the highest y-o-y growth
achieved since Dec-97.
􀂾 Consumer loans, particularly housing loans, grew even
stronger in Sep-07 at 12.6% y-o-y and 6.3% q-o-q against 10.7%
y-o-y and 5.5% q-o-q in Aug-07. Business loans regained
momentum to 15.1% y-o-y and 4.4% q-o-q (Aug-07: 13.0% y-o-y
and 5.4% q-o-q), while construction loans spurred to 21.2% y-o-y
and 4.9% q-o-q (Aug-07: 14.7% y-o-y and 3.1% q-o-q vs. 18.9%
y-o-y and 5.2% q-o-q in Jul-07).
􀂾 Deposit growth remained sturdy at 22.0% y-o-y but was flat
at 0.8% q-o-q. Growth continued to arise from demand deposits,
while fixed deposits growth turned negative on a q-o-q basis.
Meanwhile, LD ratio inched up to 70.8% in Sep-07 as loan
growth outpaced deposit growth.

CDL Hospitality Trusts

3Q07: DPU up 69% than IPO forecast

3Q revenue higher than IPO forecast by 69% to S$24.0m. The initial portfolio of four Singapore hotels registered strong revenue growth ranging from 25% to 41% yoy. Novotel Clarke Quay, acquired in June 07, made its maiden contribution of $3.8m or 16% of total revenue. In tandem with revenue growth, DPU increased 69% to 2.36 cents than IPO forecast, suggesting annualized yield of 3.92%.

RevPAR grew 27.4% to $179 on same-store basis, driven by increase in both occupancy rate and Average Daily Rate (ADR). Singapore welcomed visitor arrival of 7.6m in the first three quarters, 5.3% growth yoy. Due to tight supply of hotel rooms, the Trusts’ Singapore hotel portfolio enjoyed ADR increment of 20%, in line with industry level. Its occupancy rate was also up 7.1 ppt to 89.9%

The largest hotel owner in Singapore, still with room to grow. All CDL REIT’s assets are close to CBD or Orchard Road, which allows it to cater for both leisure and business travelers. High margin corporate business accounted for 77% of total revenue in ytd 07, up from 71% in 06. Boasting 2324 hotel rooms in Singapore, CDL is set to benefit from booming tourism sector in the Lion City. Its gearing remains low at 23%, with $550m debt capacity for asset acquisition given 45% optimal gearing ratio.

Maintain BUY with earning forecast under review.

Samudera Shipping Line Ltd

Better 3Q but FX losses to dilute growth

3Q results above expectations. Samudera Shipping Line Ltd (SS)’s 3Q07 turnover increased 7.2% QoQ to S$149m (up from S$139m), marginally beating our forecast by 5.7%. On a YoY basis however, turnover declined 9.4% from S$164.4m due to a shift in container volume mix towards higher margin shorter haul cargo. Cost of services fell by 15.8% YoY to S$130m from rationalisation of its shipping services and reduced fleet number. This resulted in reduction of vessel related operating costs like charter hire cost, bunker expense and port charges. The net effect is a gross margin expansion from 6.6% to 12.8%. Profit attributable to shareholders jumped 2.6 times YoY from S$3.9m to S$10.2m.

Gaining a foothold in India. SS has set up offices in Kolkata and Chennai, both of which have been operational from October. The two new offices would allow SS to tap into the growing shipping market in India and give them control over their operations as well as provide a higher quality of customer service.

Potential rise in FX losses from strengthening S$. With the weakening of the US$ against the S$ (US$ has weakened from US$/S$1.54 since beginning of year to US$/S$1.45 currently) and MAS’s recent announcement of allowing the S$ to appreciate faster, companies like SS with US$ revenue stream will potentially incur translation losses as revenue is converted to S$ (the reporting currency). This strengthening of the S$ versus US$ has already resulted in a FX loss of S$1.6m in 3Q07 for SS, up 245.3% YoY from a loss of S$0.5m. In an attempt to reduce the FX translation losses, SS has converted a portion of their US$ cash to S$ and placed them in short term deposits so as to enjoy the flexibility to convert back to US$ quickly should the exchange rates change direction. We estimate that SS’ FX losses may rise by approximately 121% YoY by FY08. Hence, we have lowered our FY08 earnings forecast downwards by 5% to S$18.6m from S$19.7m.

Maintain HOLD rating. Taking into consideration the potential increase in FX translation losses and a better 2H07 versus 1H07 (boosted by a better than expected 3Q earnings), we are maintaining our fair value at S$0.40, based on P/B ratio of 0.7x. With the stock’s last done at S$0.415, we see limited upside and thus reiterate our HOLD rating.

COSCO Corporation (S)

9MFY07 Results: Exceeding expectations

COSCO Corporation (S) (COS (S)) has released its 9M07 results. 9M07 earnings increased by 37.5% to S$220.1m while 3Q07 earnings increased by 36.7%. However, after stripping out gains from vessel sales in FY06, 9M07 and 3Q07 earnings increased by 63% and 87% respectively. Our current forecasts factor in full year growth of 55%.

COSCO Shipyard Group
COSCO Shipyard Group’s (CSG) revenue for 9M07 increased by 78.3% to S$1.3b. While revenue growth was below our expectations, earnings increased by about 73%, exceeding our growth forecasts of 56%. This was due to a significantly higher proportion of conversion projects, which offer higher margins as compared to offshore and new building projects.

Dry bulk shipping & shipping agency
In spite of operating a 15% smaller dry bulk fleet, COS (S)’s dry bulk shipping and shipping agency revenue for 9M07 increased by 13% yoy due to strong freight rates in the dry bulk sector. Based on the latest results, we expect

COS (S)’s dry bulk business to perform in line with expectations for FY07.
Only foreign exchange hedging, no trading or speculation Both Mr. Ji Hai Sheng, President of COS (S) and Mr. Teo Chuan Teck, COS (S)’s Financial Controller have clarified that COS (S) does not undertake any foreign exchange trading or speculation. As such, they do not anticipate that COS (S) will be faced with large foreign exchange losses.

QDII fund interest and possible A-share listing: Re-rating imminent Mr. Ji Hai Sheng indicated that COS (S) has been approached by and have been approaching QDII funds in the past month. In addition to this, he has openly stated that COS (S) is actively looking at listing on the A-share market. COS (S) could potentially be re-rated as it is one of the few pedigree Sshares in Singapore which is also a Chinese state-owned company.

Maintain BUY. Target price raised to S$8.60. We continue to like COS (S)
given its exceptional order flow, aggressive expansion plans and strong
earnings momentum. We maintain our BUY recommendation and raise our
target price to S$8.60 based on our sum-of-the-parts valuation. We have
also raised our earnings forecasts for CSG by 5% to 10%.

Regional Morning Meeting Notes, November 01, 2007

CHINA

Snippet
Railway Industry
Potential positive newsflow on Zhuzhou CSR Times Electric.

Kunming Machine Tool
(BUY/HK$22.60/Target: HK$21.40-Under Review)
Leveraging on Shenyang Machine Tool’s sales network. Maintain BUY.

Snippet
China COSCO Holdings (BUY/HK$34.05/Target: HK$45.00)
3Q07: Earnings in line with expectation. Maintain BUY.

HONG KONG

Sector
Industrials
Stricter environmental protection on paper manufacturing industry in
China.

Update
Kowloon Development (BUY/HK$24.00/Target: HK$26.50)
The favourable ruling on the acquisition of a majority stake in
Shenzhen-listed Shenzhen Properties & Resources boosts the stock’s NAV
further.

INDONESIA

Results
Bank Rakyat Indonesia (HOLD/Rp7,750/Fair: Rp6,600)
9M07: Strong net profit growth in 3Q07 driven by lower provisioning
level.

MALAYSIA

Strategy
Expect the next leg-up in the KLCI to be driven by the next General
Elections.
Maintain our target of 1,500 for KLCI.

Sector
Banking
Loan growth accelerated in Sep 07 by 9.5%, driven by strong drawdown of
business loan (ytd: +13.9%). Average lending rate was marginally lower.

Results
Axis REIT (BUY/RM2.08/Target: RM2.83)
3Q07: Results largely in line with net profit of RM7.5m. Revaluation
gains
of RM29.9m. for original five IPO properties.

Snippet
Lafarge Malayan Cement (BUY/RM1.82/Target: RM2.25)
Lafarge’s 20 sen/share capital repayment goes ex 13 Nov 07. Net yield of
11.0%
at current prices.

SINGAPORE

Sector
Property ? Residential
Lowest impact of deferred payment scheme withdrawal on mass market
segment.

Results
COSCO Corporation (BUY/S$7.75/Target: S$8.60)
9MFY07: Results exceed expectations.

Delong Holdings (HOLD/S$3.12/Fair: S$3.07)
3Q07: Profit plagued by high raw material cost.

FerroChina Limited (BUY/S$2.57/Target: S$2.90)
3Q07: Margin recovered due to favourable product mix.

Snippet
CDL Hospitality Trusts (BUY/S$2.39/Target:S$1.50-Under Review)
3Q07: DPU up 69%, higher than forecast during IPO.

Keppel Corp (BUY/S$14.70/Target: S$16.70)
Secures US$1.2b Petrobras P-56 contact, in line with expectations.
Offshore & marine contracts secured ytd amount to S$6.25b (2006 total:
S$7.3b).

THAILAND

Sector
Property
Industrial: 9M07 combined industrial land sales of top three developers
doubled yoy to 2,156 rai.

TALKING POINT: Thailand – Major Cineplex (MAJOR) acquired stakes in TRAF: A
win-win deal

For more details, click on the link.

http://research.uobkayhian.com/research/content.show.action?filename=2007110109420339433334450

Singapore Post

No significant catalyst in sight

􀂾 Story: Net underlying profit of S$34.8m was up 11% y-o-y but 5% lower than our expectations of S$36.5m.

􀂾 Point: Lower than expected mail revenue coupled with higher operating expenses were the main culprits. We do not expect operating margins to improve anymore due to higher labor-related costs and greater price competition in the logistics segment.

􀂾 Relevance: We have lowered our FY08 and FY09 core earnings estimates by 9% and 5% respectively. Our one-year DCF derived (WACC 6%, terminal growth 1%) target price is S$1.30. Due to limited upside, we downgrade Singpost to HOLD