Last price
S$
Market cap
S$ m
EPS growth 09F (%) EPS growth 10F (%) PER
09F
PER
10F
Dividend yield  09F

CapitaLand

4.16 17,671.5 (1.7) (36.6) 14.2 22.5 3.6
Keppel Land 3.45 4,932.6 (50.6) 42.9 22.1 15.5 0.7

Keppel Corp

8.22 13,106.6 42.4 (32.5) 8.4 12.4 6.1
SIA Engrg 3.18 3,432.5 2.1 (13.6) 13.1 15.2 3.8
SATS 2.60 2,821.6 (25.3) 17.6 19.1 16.3 4.6
Parkway 2.80 3,165.5 167.5 64.5 26.2 15.9 0.7


STOCK PICKING will be more important in 2010, unlike the ‘easy money’ days during last year's sharp market recovery.

Kim Eng analysts have zoomed in on 6 large cap stocks, which they believe offer tremendous upside potential, particularly if these companies take proactive steps to unlock their inherent value.

Its top pick is SIA Engineering.  The other five are:  Singapore Airport Terminal Services, CapitaLand, Keppel Land, Keppel Corp, and Parkway.


SIA Engineering

Kim Eng analysts believe the cyclical aviation industry bottomed in 1Q09 and is headed north again, and being an aircraft maintenance, repair and overhaul company, SIA Engineering is a major beneficiary.

All aircraft need to undergo basic check-ups following each landing and before the next take-off, and SIAE has the lion’s share of the market at Changi Airport, servicing 86% of all flights for its more than 60 customers.

Furthermore, with the opening of the 2 Integrated Resorts in early 2010, the rise in tourist arrivals is expected to significantly benefit SIAE’s line maintenance business.

Image
Aircraft maintenance at a hangar.

The analysts also believe that SIA is likely to divest part of its 80.6% stake in SIAE to improve free float and free up the potential of the stock to outperform, as it did for Singapore Airport Terminal Services.

 
Singapore Airport Terminal Services


Kim Eng estimates a surplus of 20 cents per share (S$215 million) that can be paid as dividends to shareholders if SATS properties held at cost are sold and leased back.

SATS holds in its balance sheet some S$460 million of leasehold properties that are held at historical cost (mainly its headquarters building, 2 inflight catering centres, 6 airfreight terminals, an express courier centre and a maintenance building).

Look out for a repeat of history: SATS sold an Express Courier Centre to DHL in 2008 for S$38 million, from which it netted a gain of S$15.4 million. The same year, SATS increased its final dividend from 6 cents per share to 10 cents per share.


CapitaLand – another spin-off listing?

The successful listing of Capitaland’s CapitaMalls Asia (CMA), raising S$2.8 billion, may mean a special dividend payout arising from the cash influx.

The spin-off is a precedent of things to come, according to Kim Eng analysts.  They are expecting the property developer to list its China operations on the mainland, when the PRC market is ready for international listings.

As at Sep 2009, its China arm, Capitaland China Holdings, has a significant asset base of S$4 billion.

China will be the key foreign market for CapitaLand, where it sees strong demand for housing, organised retail, quality serviced residences and integrated developments.

As at end-2009, it has a portfolio of over 100 projects in 40 cities across China, estimated to be worth over S$20 billion when completed.


Keppel Corp

Keppel Corp sold its 45.5% stake in SPC in June 2009 to Petrochina for S$6.25 per share or S$1.47 billion.  The sale generated a surplus of S$420 million, or about 26 cents per Keppel share.

Keppel Corp holds about 20% in Keppel Land.  Aside from the value creation opportunities at Keppel Land as highlighted above, the other obvious candidates are the potential divestment of Keppel’s stakes in Keppel T&T, K1 Ventures and MobileOne.  Estimated value of these 3 entities: S$491.7million in value, or another 31 cents per share.
 

Keppel Land – monetisation of assets to replenish residential landbank?
 

Image
Relfections at Keppel Bay, Keppel Land's premier waterfront residential project.

 Kim Eng analysts believe that there could be opportunities for Keppel Land to sell its assets to K-REIT in 2010 as follows:

(1) One-third stake in Phase 1 of the Marina Bay Financial Centre, which is due for completion in 2010. Estimated value: S$918m, assuming a capital value of S$1700 psf.

(2) One-third stake in MBFC Phase 2 and KepLand's 75.7% stake in the Ocean Financial Centre. Estimated value of the stakes in these 2 properties: close to S$1.8 billion

(3) Equity Plaza (64.6% stake), Keppel Bay Tower (11.7%) and HarbourFront Towers 1 and 2 (11.7%). Estimated market values: about S$380 million.

Assuming KepLand proceeds with all of the abovementioned divestments, it could raise nearly S$3 billion, which could be redeployed in the procurement of new land parcels for residential development.



Parkway Holdings

Parkway Holdings is an excellent proxy to the return of interest in the healthcare sector.

Kim Eng analysts expect catalysts from the monetisation of its Malaysian hospitals, strong gains from the sale of medical suites at Novena Hospital and spin-off possibilities for Parkway Nursing College.

A potential candidate for acquisition by ParkwayLife REIT, Pantai Holdings of Malaysia is one of Parkway’s most lucrative assets outside Singapore.  It is the second largest private healthcare provider in Malaysia, jointly owned by Parkway (40%) and Khazanah Nasional (60%), the investment holding arm of the Malaysian government.

Medical suites at Gleneagles have transacted recently at about S$4,300 psf in the secondary market. As such, subsequent launches of the Novena medical suites could fetch higher prices than the initial target of S$3,500 psf, resulting in a potential earnings upside of at least 25% in FY11.

Parkway College is Parkway’s education arm, and there may be a spin-off of the education arm via listing.  The management expects revenue contribution from the college to improve to 10% over the next 3 to 5 years.


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