Nomura Singapore

Strategy | S I N G A P O R E
NOMURA SINGAPORE LIMITED
Jit Soon Lim, CFA +65 6433 6969 jitsoon.lim@nomura.com TOP

DOWN
 Action Stocks for action

The Singapore market has recovered 6% from its mid-March lows, but is still 3% Sean Darby is bullish on Singapore as
down year-to-date. The market looks undervalued relative to history and poised to a play on US recovery. We are positive
rerate, in our view, given persistent negative real interest rates. A strong S$ (+5% on sectors that benefit from reflation
by year-end) and attractive market dividend yield (3%) should also boost returns for and higher commodity prices.
dollar-based investors. Our view: Buy Banks, Commodities, Offshore and Office
stocks. Price Price
Stock Rating (S$) target
Anchor themes OCBC (OCBC SP) BUY 9.46 11.80
DBS (DBS SP) BUY 14.52 16.70
A strong currency, reasonable valuations and negative real interest rates will likely Keppel Land (KPLD SP) BUY 4.45 5.56
support Singapore’s market outlook in 2011. While we expect GDP growth to slow CCT (CCT SP) BUY 1.40 1.81
to 5.3%, this is consistent with Singapore’s long-term sustainable growth. Golden Agri (GGR SP) BUY 0.70 0.90
Noble (NOBL SP) BUY 2.14 2.80
Keppel Corp (KEP SP) BUY 12.26 15.00
Greater cooperation within ASEAN will improve trade and FDI across ASEAN,
Yangzijiang (YZJ SP) BUY 1.81 2.30
while better Singapore-Malaysia relations could accelerate cross-border Fraser & Neave (FNN SP) BUY 5.93 7.60
investments. Note: 30 March 2011 prices
Springing back Analysts

Jit Soon Lim, CFA
 Looking more attractive +65 6433 6969
jitsoon.lim@nomura.com
The Singapore market looks attractive at forward P/B of 1.5x and P/E of 13x on
EPS growth of 10%. Our Asia strategist Sean Darby turned bullish recently on and the Singapore team
Singapore as a play on US recovery. With negative real interest rates likely to
persist for the rest of the year, we continue to favour reflationary sectors such as
Banks and Commodities. We also like the Offshore Marine and Office Property
sectors.
 Offshore sees strong orders; upstream valuations look attractive

Regulatory change and firmer oil price have spurred fresh orders for oil rigs,
supporting our positive views on Keppel Corp and SembCorp Marine. Valuations
for upstream CPO names like Golden Agri (BUY) and Indofood Agri (BUY) have
lagged the rise in the CPO price, which Nomura expects to be 23% higher in 2011,
on average. We also like midstream names like Noble and Olam (BUY).
 Bank EPS growth underpinned by loan growth

Loan growth remains strong (+10-12%) and non-interest income and regional
operations provide additional growth. OCBC looks positioned to grow in ASEAN
while DBS is underpinned by a high dividend yield with an optionality on higher rates.
 Still bullish on office, and cautious on residential

We remain cautious on residential on policy risks and are more positive on the
office sector as rents move higher on favourable demand-supply factors. Our
preferred picks are Keppel Land, CCT and KREIT (BUY).
 Margin pressures something to monitor

A stronger S$ and higher costs in an inflationary environment may put pressure on
margins and are worth monitoring. We expect minimal impact from Japan, and do
not expect the forthcoming Singapore elections to impact the market materially.
Any authors named on this report are research analysts unless otherwise indicated.
See the important disclosures and analyst certifications on pages 77 to 80.
Nomura 1 4 April 2011

Strategy | Singapore Jit Soon Lim, CFA
Contents
Springing back 3
Overview 3
2Q11 outlook 7
Sector views 17
Inflation fighting 25
Latest company views

OCBC 27
DBS Group Holdings 30
Keppel Land 33
CapitaCommercial Trust 36
Golden Agri-Resources 39
Noble Group 43
Mewah International 47
Keppel Corp 51
Yangzijiang Shipbuilding 55
Neptune Orient Lines 59
Biosensors International 62
Fraser and Neave 66
Venture Corp 70

Singapore strategy: 2Q11
Springing back
Overview
The Singapore market has been one of the poorer-performing markets in Asia year to
date. Although sentiment had been impacted by unrest in the Middle East and, more
recently, the earthquake in Japan, the 3% pullback year-to-date may not be entirely
justified, in our view. While there have been concerns about the impact of the
earthquake in Japan on corporate profits due to supply disruption, we find the impact is
likely to be small (see page 9).
Meanwhile, Sean Darby, our Asia strategist, recently turned bullish on Singapore as a
play on US economic recovery (Reverberations, 3 March, 2011). The fundamentals for
Singapore remain solid, with loan growth accelerating and electronics exports holding
steady.
Exhibit 1. Industrial output ex-biomed Exhibit 2. PMI – Singapore vs US

% %3m-on-3m annualized, sa 70 Singapore PMI (manufacturing)
60 % y-o-y 65 US ISM PMI (manufacturing)
40 60
20 55
50
0
45
-20
40
-40 35
-60 30
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
-80
Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11
Source: CEIC, Nomura Global Economics Source: Thomson Reuters Datastream, Nomura research
Moreover, the negative real interest rate environment in Singapore should at least
provide support, if not help the market to rerate. In our view, the market’s valuation is
looking more compelling with the pullback, with the market forward P/E of 13x below
the historical long-term average of 15x.
Exhibit 3. Singapore loan growth Exhibit 4. Singapore: real interest rate vs CPI
(S$bn) Singapore total loans y-y% (%) (%) (%)

Real 3m Sibor (LHS) CPI (RHS)
340 20 6 8
335 18 7
4
16 6
330 2 5
14
325 4
12 0
320 3
10 (2) 2
315
8 (4) 1
310
6 0
305 (6)
4 (1)
300 2 (8) (2)
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
295 0
Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11
Source: CEIC Source: Thomson Reuters Datastream, Nomura research

To be sure, there are still headwinds on the horizon. A sharply higher oil price fuelled Also see Asia Pacific Strategy —
by inflationary expectations and political unrest in North Africa may undermine global Reverberations (3 March, 2011)
recovery. At home, higher costs and a strong S$ may put pressure on margins for
companies. While there have been concerns about the impact of the earthquake on
corporate profits due to supply disruption, we find the impact is likely to be small (see
page 9).
From a policy perspective, inflation remains a key concern. While we note that inflation
may have peaked in January, the government is likely to stay vigilant. The Monetary
Authority of Singapore (MAS) is therefore likely to remain in tightening mode when it
refreshes its policy stance in April. Meanwhile, the government’s rhetoric on the
residential sector remains hawkish even after the set of more stringent policy
measures announced on 13 January.
Meanwhile, the incumbent PAP government looks set to call fresh elections as it has
started to introduce its new candidates for the forthcoming elections. As with past
elections, we do not expect this election to have a major impact on the stock market
(see page 16).
On balance, we believe that the micro- and macro-economic fundamentals are

supportive of a higher valuation for the Singapore stock market by the end of this year,
with a net 10-15% positive return by year-end. The market pullback has created better
entry levels and valuations still look reasonable, in our view, at P/BV of 1.6x and P/E of
13x. For dollar-based investors, a stronger S$ (5% appreciation expected this year) is
another source of returns.
Exhibit 5. Singapore market trailing P/B vs ROE Exhibit 6. Singapore market 12-month fwd P/E
(x) P/B (LHS) (%) (x) 12mth fwd P/E(x)

- 1 stdev (LHS) 30
3.0 20 +1 stdev
Mean (LHS)
+1 stdev (LHS) 18 25 Mean
2.5 ROE (RHS) 16
2.1x -1 stdev
14 20 18.0
2.0
1.7x 12 15.0x
1.5 10 15
8
1.0 1.3x 10 12.0x
6
0.5 4 5
2
0.0 0 0
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Source: Nomura research Source: Nomura research
The factors affecting our sector strategy remain a positive outlook for commodity prices, We favour Banks, Commodities,
a steepening yield curve and policy response to inflationary pressures. This Offshore and Office Property
environment of negative real interest rates will, we believe, support the reflationary
sectors such as Banks and Commodities. We still favour the Offshore Marine sector on
continued new order flows and the Office Property sector given the momentum of
rising rents and capital values. We are less positive on Telcos and bearish on the
Gaming sector, given what we see as rich valuations for Genting Singapore
(REDUCE).

Exhibit 7. Summary of sector views – Nomura coverage

Sector Nomura sector view Stock picks (BUY)
Bullish
Banks/Financials Valuations for the Singapore banks are attractive, with P/Bs of 1.2-1.4x FY11F on ROEs of 10-13% and OCBC, DBS
attractive dividend yields of 4%. In addition, we expect earnings growth for the banks to range between
10% and 15% in 2011. Banks are also seen as proxies for the market in a reflationary environment.
OCBC and DBS are Anand Pathmakanthan’s preferred picks among the Singapore banks. OCBC has
managed to chalk up strong loan-growth momentum, while its distinctive wealth management/insurance
franchise differentiates it from its peers. DBS is starting to show signs of focusing on its core franchises to
drive growth and profitability.
Commodities Ken Wong, our ASEAN plantations analyst, is positive on the upstream plays such as Golden Agri and Golden Agri, Indofood
Indofood Agri based on an average CPO price of RM$3,400 for 2011. Tanuj Shori likes Noble for its Agri, Noble, Olam,
upstream coal asset and strong earnings rebound in 2011 as its mid-stream assets contribute more Mewah
materially. His BUY on Olam reflects his positive view on the group’s long-term prospects with optionality
on its fertiliser investment in Gabon. He also likes mid-cap Mewah for its inexpensive valuation, stable
CPO processing margin profile and strong consumer pack distribution franchise in West Africa.
Neutral
Property REITs: Min Chow Sai remains positive on the outlook for commercial property but is cautious towards the Keppel Land, CCT,
developers. He likes Keppel Land and CCT for their office exposure. Min Chow remains cautious UOL
towards developers given the headwinds of more supply, downward pressure on rents and the potential
of higher interest rates. He is defensively positioned in developers with attractive valuations and office
exposure like UOL.
Conglomerates Lisa Lee’s bullishness on the Offshore & Marine sector has been supported by the flow of new orders Keppel, SMM , F&N
announced by Keppel and SembCorp Marine. While the sector is well held, continuing order flows will
likely sustain the outperformance of the sector. Jitsoon Lim likes F&N for its growing F&B business and
potential alliances with new shareholder Kirin Holdings.
Transport Airlines. SIA looks well positioned to benefit from the recovery in the aviation cycle as premium travel SIA, NOL
recovers. Jim Wong has a BUY on SIA and believes the momentum of improving premium traffic will
cushion rising fuel costs. Land transport. As the government changes its public transport policies to
increase usage of public transport, changes in the short term may affect operators’ profitability. Lisa Lee
is NEUTRAL on SMRT and recently upgraded Comfort Delgro (BUY) on favourable valuations.
Shipping. Andrew Lee, our regional shipping analyst, is positive on NOL, which is seen a beneficiary of
recovery in container traffic across the Asia-Pacific routes.
Bearish
Gaming Choong Wai Kee believes analysts have generally overestimated the potential of the gaming market in
Singapore, as borne out by Genting Singapore’s results. He believes the stock is overvalued and
maintains a REDUCE. Min Chow Sai is negative on CDL H-REIT on valuation grounds, as the shares
have priced in optimistic scenarios for occupancies and room rates.
Telco Sachin Gupta believes that while the telco sector offers stability of cashflow, strong balance sheets, and M1
potential for capital management, there are few catalysts to help rerate. He is NEUTRAL on Singtel and
maintains REDUCE on Starhub given the erosion in its core business. He likes M1 for its yield.
Source: Nomura research

Exhibit 8. Top picks for the Singapore market

Price (S$) Price P/E (x) P/BV (x) Yield (%)
30 Mar 11 Rating target (S$) FY11F FY11F FY11F Nomura comment
Reflation
OCBC 9.46 BUY 11.80 12.8 1.4 3.6 Private banking platform will diversify earnings, while
(OCBC SP) capital ratios are strong. Relatively larger overseas
platform compared with peers’.
DBS 14.52 BUY 16.70 11.5 1.2 4.0 Increasingly tangible traction in leveraging core
(DBS SP) franchise strength and building an execution base for
regional growth initiatives should deliver substantial
restructuring gains over the medium term.
NOL (NOL SP) 1.96 BUY 2.60 11.1 1.1 1.8 Container freight rates close to bottoming, with
quarterly earnings set to rebound after 1Q11; NOL is
our top pick in the container shipping sector.
Property-related exposure
Keppel Land (KPLD SP) 4.45 BUY 5.56 16.6 1.4 2.0 Defensive stock notwithstanding our cautious view on
residential property; high exposure to the Singapore
office market, trading at an implied EV of S$1,181psf
for its SG office portfolio, which we think is
conservative.
CCT (CCT SP) 1.40 BUY 1.81 19.7 0.9 5.1 CCT remains the dominant office landlord in Singapore
in terms of International Grade-A (IGA) office space,
with 2.3mn sf, equal to 72% of its total office portfolio
and 62.6% of its commercial portfolio.
Commodity and Energy related exposure
Golden Agri (GGR SP) 0.70 BUY 0.90 11.9 1.0 1.7 We believe Golden Agri offers strong growth potential
on the back of its strong mature hectarage increases in
the coming years. GGR’s problems with
environmentalists could start to wane as it starts to
meet conditions set by the RSPO.
Noble (NOBL SP) 2.14 BUY 2.80 14.4 2.2 1.5 Commodity price upcycle, along with strong
performance in agri (oilseeds and sugar), energy
(coal), and locked margins in FY11F should ensure a
good FY11 for the company.
Mewah (MII SP) 0.98 BUY 1.34 10.5 1.8 0 Strong consumer pack oil franchise with majority
market share in W Africa and offers stable margin
exposure on the refining side; trading at 25% to
Singapore-listed peers.
Keppel Corp 12.26 BUY 15.00 11.3 2.4 3.4 Strong offshore order momentum to underpin stock
(KEP SP) outperformance. Optionality on Brazil contracts. Stock
has also correlated well with oil price.
Situational and M&A
Yangzijiang (YZJ SP) 1.81 BUY 2.30 10.5 2.9 2.5 Well-entrenched containership-building franchise in
China; key catalyst: potential US$2.2bn order from
Seaspan (22 10,000 TEU containerships to be
confirmed in batches).
Biosensors* 1.15 BUY 1.50 16.5 2.7 0 Strong growth for its stent sales in EU and Asia,
(BIG SP) continued growth in China and potential revenue share
from Japan underpin prospects. Recent positive
clinical trial data at TCT could provide impetus for new
products. New shareholder Hony Capital could help
enhance its China presence.
Fraser and Neave 5.93 BUY 7.60 13.9 1.2 2.9 Strong F&B growth outlook with optionality on its
(FNN SP) property assets. Potential split of F&B and property
may unlock value. New shareholder Kirin could help
create new products for its F&B business.
Venture Corp 9.56 BUY 11.50 13.1 1.4 5.8 Successfully restructured its business mix with less
(VMS SP) reliance on printing and imaging. Test & Measurement
and Retail Systems solutions now provide greater
balance. Strong cashflows, improving margins, and
strong dividend yield make Venture an attractive
company, we believe.
* March FYE; FY12F estimates
Note: see respective company reports in this document for valuation methodology and investment risks
Source: Bloomberg, Nomura estimates

2Q11 outlook
Although the Singapore market started the year promisingly, inflationary concerns in
Asean, unfolding unrest in North Africa and the fallout from the earthquake in Japan
saw the ST Index pull back to a low of 2,935 before ending the quarter 3% lower from
the start of the year.
Exhibit 9. Outperformers in 1Q11 Exhibit 10. Underperformers in 1Q11
(%) STI Banks (%) Property Commodities

13 Telco REIT 5 Gaming Transport
Cap goods Tech STI
8 Media 0
3 (5)
(2) (10)
(7) (15)
(12) (20)
Jan-11 Feb-11 Mar-11 Jan-11 Feb-11 Mar-11
Source: Bloomberg, Nomura research Source: Bloomberg, Nomura research
While the Offshore sector outperformed and REITs and Banks traded in line, the Offshore and Telco outperformed,
higher beta Commodities sector underperformed. Property Developers also while Commodities and Property
Developers underperformed
underperformed, while the more defensive Telco sector outperformed.
While we have a constructive view for the market for the rest of the year, we assess
the outlook for the market by addressing some questions that may be relevant for the
market.
1. What is the impact of the recent earthquake in Japan on Singapore?

The impact from the earthquake in Japan can be seen from two angles:
 Direct trade and investments with Japan;
 Disruption in supply impacting companies relying on components from Japan and

the rise in raw materials/commodity prices as a result of temporary production
disruptions in Japan.
Although Japan is a major trading partner for Singapore, it has become less important
as Singapore has diversified its end markets. As a percentage of total exports, Japan
accounts for about 4.7% of total exports, compared with 7.7% for China in 2010
(source: CEIC). In this regard, the impact on Singapore’s exports from the earthquake
may not be as material.

Exhibit 11. Asia exports to Japan as % of total Exhibit 12. Asia’s imports from Japan as % of total
exports and % of GDP (2010) imports by type of imports (2009)
Source: CEIC, Nomura Global Economics Source: UN COMTRADE, Nomura Global Economics
Japanese tourists accounted for a significant 5% of total tourist arrivals into Singapore
in 2010 (next Exhibit, left). However, since the advent of the integrated resorts, tourist
arrivals have become more diversified and this will lessen the impact of fewer
Japanese tourists coming to Singapore in the near term.
From an FDI perspective, Japanese FDI into Singapore remains significant and a
delay in FDI decisions due to the earthquake may have an impact on Singapore’s
economy. However, we do not expect such delays to result in cancellation or reduction
in FDI.
Exhibit 13. Impact on tourism in Asia Exhibit 14. Capital flows from Japan to Asia (2009-
10)
Source: UN COMTRADE, OECD, Nomura Global Economics Source: CEIC, Nomura Global Economics
Our Japanese strategist, Mr Iwasawa, has highlighted the potential impact to Japan’s Also see our automotive report
corporate earnings as a result of production disruptions arising from power shortages (22 March, 2011)
as well as reduction in supply of critical components like microcontroller units (MCU)
used in cars for which Japan is a global supplier (see Automotive Microcontroller
production stoppage: impact on Japanese equities, 22 March). Also, the chemicals
industry in Japan has been affected by the earthquake, with production of upstream oil
refining to downstream chemical manufacturing disrupted.
While the supply chain disruptions will likely impact economic growth in Japan this year,
our economists expect Japan to see stronger growth in 2012 (GDP forecast raised to
2.8%) as a result of the reconstruction. The direct impact on Singapore for this year is
small, in our view.
From a company-specific perspective, we highlight in the next Exhibit but one

companies that may be impacted positively or negatively from the quake. GLP, which
has significant properties in Japan, has confirmed that its properties are largely
unaffected. However, it may have to incur repair costs of up to US$38.8mn, according

to the company’s official announcement on 14 March. Noble is a potential beneficiary

from supply disruptions as it is a major energy trader. While SATS has exposure to
Japan via its 51% stake in Japan Airlines Catering, we understand that there has been
minimal disruption. The disruption in the refineries in Japan and the manufacturing of
wafers and electronic components may have an impact on the electronics supply chain.
It is plausible that Venture may be impacted if its inventory is drawn down and supply
does not resume in the coming months.
Exhibit 15. Potential impact of the disaster on Japan’s trade balance over six
months
Exhibit 16. Singapore corporate – Japan exposure

Company Japan exposure Impact
Keppel Has JV with Nippon Steel to manufacture legs for No impact from quake. Facilities not affected.
jack ups.
SATS Owns 51% of JAL catering. No impact. May have seen near-term boost
Genting Singapore Japanese tourists accounted for 4.5% of the 11.6mn arrivals May affect Singapore's hotel sector but probably
in 2010. negligible impact on GENS' gaming revenue.
Golden Agri No direct exposure to Japan. Japan palm oil consumption No direct impact.
amounts to 1.2% of global consumption. We do not expect
this to drop, although there may be delays, depending on
any damage to ports which could slow trade.
IndoFood Agri No direct exposure to Japan. Japan palm oil consumption No direct impact.
amounts to 1.2% of global consumption. We do not expect
this to drop though there may be delays, depending on any
damage to ports which could slow trade.
Parkway Life REITs About 30% of NPI comes from Japan. Management issued a statement to say that most
properties are located at Kansai and Kyushu, which are
less affected and there is no major damage to its
properties reported so far.
Mapletree Logistics About 30% of NPI comes from Japan. Management issued a statement to say that only one
out of the 14 properties in Japan, the Sendai Centre, is
damaged and this property accounts for only 0.7% of
total gross revenue.
Starhill Global REITs About 5% of NPI comes from Japan. Management has yet to issue any statement.
Global Logistics About 86% of EBIT (ex revaluation gain/loss) comes from According to the company's statement, the preliminary
Properties Japan. repair cost is estimated at US$47.5mn (0.8% of
portfolio value) and loss of rental income of US$10.8mn
(EBIT ex revaluation = US$300mn in 9MFY11).
CapitaMalls Asia About 2% of income comes from Japan. Minimum impact.
Ascott REITs About 6% of income comes from Japan. Minimum impact.

2. What is the impact of recent policy measures on corporate

profitability?
The government has adopted an appreciating S$ policy to manage inflation and Measures to reduce dependence
moderate economic growth amid full employment in Singapore, easy global liquidity on cheap unskilled foreign
workers may have the unintended
and inflation. To enhance productivity, the government announced more measures to
consequence of impacting
reduce employers’ dependence on cheap unskilled foreign workers by raising the corporate profitability
foreign worker levies. The government also announced an increase in the employer
CPF contribution by 0.5pp effective September 2011. These measures together may
have the unintended consequence of impacting corporate profitability.
Competitiveness:
With a strong S$ policy, our forex strategists forecast the Singapore dollar to
appreciate to S$1.21 by year-end or a 6% progress from last year (Exhibit 48).
Singapore companies with significant revenues denominated in USD could see
adverse translation effects from a stronger S$. On the other hand, those who buy
inputs in USD but sell domestically could see better margins. The impact of a strong
S$ is summarised below.
Exhibit 17. Impact of stronger S$ vs US$ on Singapore companies

Nomura comment
Net profit % impact on net profit if S$ strengthens by 10% vs
% of earnings in US$ in 2011F USD in 2011
DBS 20% of earnings are from its Hong Kong S$2,911mn -2%.
subsidiary.
SPH Newsprint in US$ and forms about 18% of S$308.4mn +3%.
total costs.
Keppel Corp Offshore & marine contracts are in US$ and S$1,156mn As materials and equipment for its offshore & marine
account for 60% of earnings. contracts are in US$, there is a natural hedge. These
account for about 70-75% of total costs.
SembCorp Ind Exposure to US$ mainly at SMM level. The S$621.6mn Exposure to US$ is mainly at SMM level. The bulk of
bulk of utilities are in S$, UK sterling and utilities are in S$, UK sterling and other currencies.
other currencies.
ST Engineering Exposure to US$ from its US facilities in S$571.4mn Every +/- US$1ct against will have +/-S$1.3mn impact
aerospace and marine divisions. on net profit.
SembCorp Marine While the bulk of SMM's rig building and S$569.6mn Materials and equipment for its offshore contracts are in
conversion orders are in US$, also depends US$, providing a natural hedge. These account for 70-
on country of origin of the customer. 75% of total costs. The remainder is hedged and impact
depends on hedging position.
City Developments 15. S$675mn -2%
Keppel Land 15. S$390mn -2%.
Biosensors USD functional ccy. US$40.5mn -4%.
Venture Corp >95% sales in US$ offset by 90% COGS in S$206.7mn 10% USD depreciation to SGD will result in a 0.8~1pp
US$. shrink in GMs. Net operating profit will shrink by 25~30%
(all else maintained).
SIA -247%. S$1,259mn +12%.
Higher costs:
The increase in foreign worker levies proposed in 2011 is on top of higher levies Increase foreign worker levies
already announced in the 2010 budget. Although the increase in levies is staggered to proposed in 2011 is on top of
higher levies already announced
give time for employers to adjust, margins may be pressured by: 1) higher costs of
in the 2010 budget
retaining foreign workers; and 2) the need to pay more for local employees who are in
short supply amid full employment. The higher worker levies and the 0.5pp CPF
adjustment will, on the government’s estimates, raise labour costs by 1.7% and 0.5%
respectively, by 2012.

Exhibit 18. Singapore budget 2010 and 2011 – foreign worker levies
Budget 2010:
Levy rates raised by S$10~S$30 for most Work Permit holders on 1 July 2010, with further adjustments in 2011 and 2012 with a total increase of
about S$100 in average levies per worker in manufacturing and services over three years.
S Pass workers will have two levy tiers with the rates for the first and second tiers at S$100 and S$120 in July 2010, up from a single rate of S$50
currently. This will be raised to reach S$150 and S$250 by July 2012.
Budget 2011:
Higher foreign worker levies from 1 January 2012 to July 2013 – for the construction sector, the levy will increase by a further S$200. For services
and manufacturing, it will increase by S$180 and S$100 respectively. S pass holder will see levies increase to S$300-450.
Source: Ministry of Finance, Nomura research
3. What is the outlook for Singapore corporate earnings, and are

market valuations reflecting this outlook?
Earnings outlook:
The 4Q10 reporting season saw 45% of companies under our coverage exceed our Earnings revision index shows a
expectations, while 32% met expectations and 17% fell behind. The earnings revision slowing in momentum
index however has seen a slowing in momentum as analysts build in more realistic
assumptions against the backdrop of potential margin pressure from higher costs.
Exhibit 19. Singapore market earnings revisions Exhibit 20. Singapore market EPS growth trend
30 Earnings Revision (%) 2011F EPS Growth

18 2012F EPS Growth
20
16
10
14
0 12
(10) 10
(20) 8
6
(30)
4
(40) 2
(50) 0
May-92
May-96
May-00
May-04
May-08
Nov-10
Mar-11
Jan-91
Sep-93
Jan-95
Sep-97
Jan-99
Sep-01
Jan-03
Sep-05
Jan-07
Sep-09
Jan-11
Jul-10
Aug-10
Sep-10
Oct-10
Dec-10
Jan-11
Feb-11
Source: Nomura research Source: Bloomberg estimates, Nomura research
We also note that 43% of companies under our coverage reported foreign exchange 43% of companies under our
losses, albeit mainly due to translation losses as a result of the strong Singapore dollar. coverage reported FX losses
This issue bears monitoring considering the continued strength of the Singapore dollar
expected for the rest of the year, compounded by margin pressures due to cost
increases.

Exhibit 21. SGD/USD performance since 2009
(%) SGDUSD
15
10
(5)
(10)
May-09
May-10
Mar-09
Nov-09
Mar-10
Nov-10
Mar-11
Jan-09
Jul-09
Sep-09
Jan-10
Jul-10
Sep-10
Jan-11
Source: Bloomberg
Nomura’s market EPS estimates suggest growth of 11% for FY2011 and 9% FY2012,
respectively. We expect this growth to be underpinned by the Banks which we
forecast will show low double-digit growth. Commodities are the other key driver for
market EPS growth, in our view, on a weak base in 2010 but also with the top line of
the CPO companies likely to be driven by higher yields and higher prices.
Conglomerates, mainly the offshore companies, will likely see a drag in 2011 as profit
recognition from old contracts tapers off before new contracts start to contribute.
Elsewhere, we expect Property Developers to see steady EPS growth this year on
presold projects, but growth is likely to be volatile going forward due to the property
measures put in place in January.
Exhibit 22. Market valuation – Nomura coverage

P/E (x) EPS growth (%) P/BV (x) ROE (%) Div yield (%)
2011F 2012F 2011F 2012F 2011F 2012F 2011F 2012F 2011F 2012F
Banks 11.7 10.4 9.4 12.7 1.3 1.2 11.2 11.8 4.1 4.6
Capital Goods/Conglo 15.2 13.8 (4.8) 9.8 1.8 1.6 11.9 11.5 3.2 3.2
Commodities 15.5 13.1 36.9 18.0 2.3 2.1 15.4 16.2 1.4 1.8
Media 16.6 16.0 (15.7) 3.7 2.9 3.0 18.3 18.6 5.4 5.4
Gaming 24.8 23.5 49.4 5.4 4.0 3.5 16.6 14.7 0.0 0.0
Property - developers 16.1 17.0 3.5 (5.1) 1.0 1.0 6.2 6.9 1.5 1.6
Property – REITs 17.6 17.4 (0.2) 2.4 1.0 1.0 5.8 6.0 5.6 5.7
Technology 12.8 11.6 7.9 9.6 1.4 1.3 10.7 11.3 5.7 5.7
Telecom 12.7 12.2 0.6 3.8 2.1 2.0 16.9 16.9 5.3 6.0
Transport – land 11.1 8.5 29.8 11.3 1.1 1.0 10.0 12.0 4.1 5.3
Transport – air 14.5 13.1 8.8 11.3 2.2 2.0 15.1 15.6 4.0 4.3
Transport - shipping 11.3 8.8 (30.8) 27.8 1.1 1.0 12.8 14.8 1.8 2.3
Total market 12.9 12.1 11.3 8.8 1.5 1.5 11.4 12.0 3.3 3.7
Source: Nomura estimates
Valuations appear undemanding

With EPS growth of 11% forecast for Singapore (based on Nomura estimates), the Market valuation looks
market P/E of 13x looks undemanding relative to growth and historical trading ranges of undemanding relative to growth
between 10x and 20x since 1997. Looking at the market’s trading pattern since mid 2010,
it would appear that it has undergone a slight de-rating. This is possibly attributed to the
Banks which underperformed the market for much of last year on concerns about margin
pressures. However, these concerns are well flagged and we believe priced in given the
attractive valuation of the Banks at 11.7x P/E, P/B of 1.3x and dividend yield averaging
4.1% on FY11F forecasts. On price to book as well, the market looks attractive, in our
view, with a trailing price to book of 1.7x and ROE of 12%.

Exhibit 23. Singapore market trailing P/B vs ROE Exhibit 24. Singapore market 12-mth fwd P/E
(x) P/B (LHS) (%) (x) 12mth fwd P/E(x)

- 1 stdev (LHS) 30
3.0 20 +1 stdev
Mean (LHS)
+1 stdev (LHS) 18 25 Mean
2.5 ROE (RHS) 16
2.1x -1 stdev
14 20 18.0
2.0
1.7x 12 15.0x
1.5 10 15
8
1.0 1.3x 10 12.0x
6
0.5 4 5
2
0.0 0 0
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Regional valuation comparison
From a regional perspective, we believe Singapore’s valuation on P/B looks attractive,

at 1.5x FY11F and ranks among the lowest in the region. However, from a P/E
perspective, we think it looks fairly valued at 14x (EPS growth of 8%) compared with
the region, on consensus estimates.
Exhibit 25. Regional consensus valuation

P/E (x) P/BV (x) EPS growth (%) Dividend yield (%) ROE (%)
Index
Country universe FY11F FY12F FY11F FY12F FY11F FY12F FY11F FY12F FY11F FY12F
Australia AOI 12.9 11.3 1.9 1.7 18.8 13.0 4.3 4.7 14.7 15.7
China CSI 300 12.9 10.9 2.1 1.8 22.1 17.1 2.4 3.0 17.1 18.0
Hong Kong HSI 12.0 10.5 1.7 1.5 11.5 14.5 3.5 3.9 14.0 15.1
India SENSEX 15.2 13.0 2.5 2.2 17.3 17.0 1.5 1.7 17.6 18.1
Indonesia JCI 14.2 12.2 3.0 2.6 28.8 16.3 2.8 3.3 22.4 22.8
Korea KOSPI 10.4 9.2 1.4 1.2 30.6 13.7 2.0 2.3 14.1 14.7
Malaysia KLCI 14.8 13.4 2.2 2.0 14.9 10.2 3.8 4.1 14.6 15.0
Philippines PASHR 13.1 11.7 2.1 1.8 14.3 13.2 3.1 3.3 16.2 16.2
Singapore FSTAS 13.6 12.3 1.5 1.4 8.1 10.6 3.0 3.3 10.2 10.8
Taiwan TWSE 13.0 11.4 1.9 1.8 12.2 15.0 4.5 4.9 14.2 15.6
Thailand SET 12.4 10.7 1.9 1.8 8.6 16.2 3.8 4.3 16.1 16.9
Source: Bloomberg, Thomson Reuters Datastream, IBES, Nomura International (Hong Kong) Limited – Quantitative research
Dividends (3% FY11F yield) and the expected strength of the Singapore dollar (+6% Dividends and strong S$ provide
for 2011 per Nomura forecast) should provide another source of returns for dollar- another source of returns for
US$-based investors
based investors, in our view.
An important trend in the 4Q10 results is the willingness of Singapore corporates to Special dividends or higher
reward shareholders with higher dividends. For example we noted OCBC increased its payouts will support additional
payout ratio, while Keppel announced a 1-for-10 bonus and a higher dividend for the returns
year. SembCorp Marine announced a 25-cent special dividend. Special dividends or
higher payouts would support additional returns.

Exhibit 26. Singapore market – total returns for US$-based investors

(%) STI USDSGD Div Yield
80
60
40
20
(20)
(40)
(60)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1Q11
Source: Bloomberg, Nomura research
4. Will the high oil price and inflation affect the stock market?
Our global strategist Ian Scott notes that while inflation will likely have a significant A rising oil price is a greater
impact on equities in emerging markets, he thinks that at the aggregate level, inflation threat to market performance
than rising interest rates
should not be a major concern for developed markets. However he adds that inflation
may have an impact on relative sector and stock level performance. (See Global
Strategy Weekly, 23 January 2011.)
We looked at recent history to understand the effect of inflation on stock market

performance by sectors. The most recent history that would be relevant would be the
inflation episode back in 2007 to 2008.
Exhibit 27 shows that the airlines sector not surprisingly was affected by inflation as
the surging oil price and commodity prices resulted in fears of demand destruction.
Interestingly as shown in Exhibit 31, the property developers pulled back as inflation
progressed from March 2007 to mid 2008. However part of the pullback could be
attributed to the government putting in measures to curb speculative activity in the
residential sector by withdrawing deferred payment terms in October 2007.
The media and telco sectors were the more resilient sectors (Exhibits 28 and 30) while
commodities not surprisingly benefitted from the inflation environment then.
Exhibit 27. CPI vs airlines (SIA) Exhibit 28. CPI vs media (SPH)
(%) (Price/share) (%) (Price/share)

CPI (LHS) CPI (LHS)
8 20 8 Media (RHS) 6
Airlines - SIA (RHS)
7 18 7
6 16 6 5
5 14 5 4
4 12 4
3 10 3 3
2 8 2
1 6 1 2
0 4 0 1
(1) 2 (1)
(2) 0 (2) 0
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10

Exhibit 29. CPI vs commodities Exhibit 30. CPI vs telcos
(%) CPI (LHS) (Mkt cap) (%) CPI (LHS) (Mkt cap)
8 Commodities (RHS) 70,000 8 Telco (RHS) 80,000
7 7 70,000
60,000
6 6
60,000
5 50,000 5
4 50,000
4 40,000
3 3 40,000
2 30,000 2 30,000
1 20,000 1
20,000
0 0
10,000 10,000
(1) (1)
(2) 0 (2) 0
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Exhibit 31. CPI vs property Exhibit 32. CPI vs transport
(%) (Mkt cap) (%) (Mkt cap)

CPI (LHS) CPI (LHS)
8 Property(RHS) 50,000 8 8,000
Transport (RHS)
7 45,000 7 7,000
6 40,000 6
6,000
5 35,000 5
4 30,000 4 5,000
3 25,000 3 4,000
2 20,000 2 3,000
1 15,000 1
2,000
0 10,000 0
(1) 5,000 (1) 1,000
(2) 0 (2) 0
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Jun-03
Jun-04
Jun-05
Jun-06
Jun-07
Jun-08
Jun-09
Jun-10
5. Will the general elections have an impact on the market?

With the redrawing of the electoral boundaries and the introduction of new election Elections will likely be called after
candidates by the PAP government, indications are that elections will likely be called the next Parliamentary session
possibly after the next Parliamentary session scheduled for 11 April 2011. Once
Parliament is prorogued, nomination and polling dates will be announced.
Exhibit 33. Past elections in Singapore

Year Polling day New Parliament convention % Vote*
1984 22-Dec-84 25-Feb-85 64.8
1988 3-Sep-88 9-Jan-89 63.2
1991 31-Aug-91 6-Jan-91 61.0
1997 2-Jan-97 26-May-97 65.0
2001 3-Nov-01 25-Mar-02 75.0
2006 6-May-06 2-Nov-06 66.6
* percentage of votes secured by the PAP
Source: Singapore Elections website
For this forthcoming election, we believe the PAP is likely to focus on leadership
renewal and sustaining Singapore’s growth while sharing the fruits of growth with
everyone. The 2011 budget reinforced the government’s promise with generous
handouts to the man on the street. As always, the PAP is looking for a strong mandate
to continue with its strategy to sustain Singapore’s long-term progress.

In the last election, the PAP secured 66.6% of the votes and won 82 of the 84 We do not expect material market
Parliamentary seats contested. The market’s reaction to that election was mostly reaction
muted with the market edging up only slightly. In the 2001 elections, however, the
market posted a strong 20% rise over four weeks after polling day — outperforming
the MSCI Asia Ex-Japan Index. The strong market performance was probably due to
the rebound in global markets post the 11 September attacks. The Fed Reserve had
also cut interest rates aggressively to stabilize the US economy. However part of
Singapore’s outperformance relative to the region could be attributed to the strong
showing by the PAP in the 2001 elections. Given that the PAP is widely expected to
retain power in the coming elections, we do not expect material market reaction to the
elections.
Exhibit 34. STI performance after election
(Rebased)
125
2001
120
115
110
105
100 1997
1988
95 1991
1985
90 2006
85
1 10 2 week 19 4 week
Period
Source: Bloomberg, Nomura research
Also see our Global Strategy Weekly

(23 January, 2011)

Sector views
Commodities (Bullish) — Tanuj Shori/Ken Arief Wong

Upstream planters severely punished – offer ‘deep value’. We still believe that BUY Indo Agri and Golden Agri
CPO prices will be supported at least through 1H11 and believe that the market has
taken too negative a view on CPO upstream plays – having punished names like
IndoAgri and Golden Agri, down 22-27% from the peaks. Even at an assumption of
RM3,000/tonne (below consensus view of RM3,100/tonne based on a Reuters poll
published on 9 March 2011), these names offer good value and upside in our view.
BUY Indo Agri and Golden Agri, after the recent sell-down, in our view. We like
IndoFood Agri for its strong CPO production growth, coupled with higher leverage to
CPO prices (being a purer plantation play), while Golden Agri is the most liquid CPO
name in our coverage, with pure leverage to CPO prices.
Exhibit 35. Sector P/E vs CPO price
(P/E) Market cap weighted sector P/E (LHS) (RM/MT)

30 MPOB CPO price (RHS) 4,600
4,100
25
3,600
20
3,100
+1SD=15.9
15 2,600
2,100
10
Mean=11.7 1,600
5
-1SD=7.4 1,100
0 600
May-04
May-09
Nov-07
Mar-08
Nov-10
Jan-04
Oct-04
Feb-05
Jul-05
Dec-05
Apr-06
Sep-06
Jan-07
Jun-07
Aug-08
Dec-08
Oct-09
Feb-10
Jul-10
Midstream – selective. Among the midstream space, our top pick is Noble, as we think Noble is our top pick in
that the current commodity price upcycle, along with strong performance in agri, energy midstream
and locked margins in FY11F should ensure a good FY11 for the company. The
company also stands to benefit from high coal prices due to Australian floods, as its
mines in NSW are relatively insulated from the floods. It should also be a net beneficiary
of any rising coal prices due to higher Japanese demand post the earthquake.
We like Olam, as its asset strategy continues to surprise positively and it is trading at
extremely attractive valuations post the recent correction on concerns about its export
incentives in our view. Its recent investments (e.g. Gabon fertiliser project, sugar
refinery in Nigeria), if executed well, could act as a substantial boost to the bottom line,
in our view. Olam also reiterated the recent uptick in its growth guidance helped by
faster-than-expected contributions of various assets, such as almonds, tomato
processing and wheat milling. Although we think there is inherent dilution risk (to fund
expansion), we believe the recent correction is overdone and presents buying
opportunity. It is now trading at 16.5x CY11F P/E, de-rating from peak of ~21x CY1
P/E, and at an all-time low discounting the time during financial crisis.
We are NEUTRAL on Wilmar, as we expect a shrinking valuation premium due to

investors’ concerns about its property foray. We think that the stock should remain
rangebound in the near term in the absence of catalysts. During our recent marketing,
we saw a great deal of interest in the stock at current levels, with investors getting
positive vibes from recent insider buying. We also like Mewah as valuations look
oversold and should bounce back, in our view. Though low liquidity remains a concern,
we like the business for its leadership in West Africa pack oil, scale in palm refining
and likely high capex intensity.

Banks and Financials (Bullish) — Anand Pathmakanthan

Strong earnings recovery over FY10 (15-30%) was underpinned by a post-credit crisis Earnings growth to slow to 10-
stabilisation of the operating environment with loan growth regaining momentum, loan 15% in FY11F on normalised P&L
drivers, lack of NIM traction
loss provisioning declining and largely market-driven trading income rebounding.
Sector earnings are seen to expand by a more normalised 10-15% over FY11F –
against a backdrop of solid balance sheets and lack of interest rate (and hence, NIM)
traction, it is the quality of earnings growth and underlying ROA, ROE traction that will
be key in our view. Issues that will influence these are:
 Loan volumes: sector loan growth is set to slow to 10-12% in FY11 (FY10: +15%),
primarily due to housing loans decelerating. Indications are corporate and SME
credit demand is picking up across the region – if sustained, this represents a
welcome diversification for the Sing banks which are guiding for low-mid teens loan
growth, underpinned by faster-growing offshore franchises.
 Fee income: all Singapore banks are pursuing fee-generative synergies – OCBC
via integrated wealth management platform, UOB via pan-ASEAN distribution
infrastructure, DBS via Sing-Greater China treasury flows – which is crucial in
reducing dependence on the pressured S$ loan space and raising ROA.
 Capital: regulator MAS is expected to clarify its position on BASEL III by mid-2011.
Swiss-like capital “top-up” requirements i.e. Swiss regulator is proposing 10% core
equity ratio minimum (vs BASEL III minimum of 7%) with another 9ppts in Cocos
(contingent convertible bonds), are possible but unlikely to be as punitive.
Singapore banks already have 12-14% core equity ratios but higher minimums
would limit ROE-enhancing M&A and capital management potential.
While near-term catalysts are lacking, Singapore banks have significantly Catalysts lacking but priced into
underperformed regional peers already and now offer a very attractive combination of now attractive quality-valuation
quality and valuations i.e. 4.0% high-conviction yield, stable (retail-sourced) liquidity, dynamic; OCBC is our top pick
ample core capital and relatively low valuations (1.2-1.4x P/BV with FY11F PE
approaching single-digits) in our view. Maintain sector Overweight with OCBC our top
structural pick for its diversified and increasingly fee income-driven ASEAN-centric
franchise.
Exhibit 36. Singapore banks – NIM vs profits

NIM (%) Net earnings (S$mn)
DBS OCBC UOB DBS OCBC UOB
2.5 800
2.4 700
2.3 600
2.2 500
2.1 400
2.0 300
1.9 200
1.8 100
1.7 0
4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Source: Company data, Nomura research

Exhibit 37. Singapore yield curve
4.0
3.5
3.0
2.5
2.0
1.5
Singapore - now
1.0
Singapore - end 2009
0.5
0.0
3m 6m 1 2 3 4 5 7 8 9 10 15 20
Source: Thomson Reuters Datastream, Nomura research
Exhibit 38. Relative regional performance
SG Banks Indonesian Banks

155
Malaysian Banks Thai Banks
145 MSCI Asia ex JP Fin MSCI China Fin
135 MSCI India Fin
125
115
105
95
85
May-10
May-10
Mar-10
Mar-10
Nov-10
Nov-10
Mar-11
Mar-11
Jan-10
Jan-10
Feb-10
Feb-10
Apr-10
Apr-10
Jun-10
Jun-10
Jul-10
Jul-10
Aug-10
Aug-10
Sep-10
Sep-10
Oct-10
Oct-10
Oct-10
Dec-10
Dec-10
Jan-11
Jan-11
Feb-11
Feb-11
Source: Company data, Nomura research

Property (Office: Bullish; Residential: Neutral) — Min Chow Sai

We continue to favour the office property sector over the residential sector. The former We continue to favour the office
continues to see improving rents and capital values while the latter is starting to feel property sector over residential
the effects of the government’s administrative measures. While developers have
underperformed the broader market over the past three months and are currently
trading at 24% below NAV, we do not foresee the physical market providing catalysts
for the discount to narrow.
Exhibit 39. Monthly residential transaction
6,000 Secondary Transaction

Primary Transaction Govt. announced cooling measures in Sep09, Feb10, Aug10
& Jan11
5,000
4,000
3,000
2,000
1,000
0
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Source: URA, Nomura research
Exhibit 40. Office landlords/developers – performance YTD

(%)
8 YTD relative performance
6
(2)
(4)
31-Dec-10
14-Feb-11
15-Jan-11
30-Jan-11
01-Mar-11
16-Mar-11
Note: office landlords: CCT, KREIT, Suntec, Keppel Land; Developers: Capitaland, City Dev, Allgreen & Wing Tai
Post the 13 January measures, transaction volumes have started to slow – the number Transaction volumes have started
of pre-sales (including ECs) in February was down 20% m-m to 1,228 units while the to slow post the 13 January
measures
secondary market appears more pronounced – based on caveats lodged as of 21
March, there were 1,001 secondary transactions (re-sales and sub-sales) in February,
compared to 2,315 in January (Exhibit 39).
Considering transaction volume typically leads home prices by six to nine months, and
nearly half of this year’s completions are in the prime luxury segment, our forecast for
home prices in the mass-/mid-market to remain flat and prime luxury segment to
correct by 8% by end-2011 remains unchanged.

On the other hand, recent transactions suggest investors’ appetite for commercial
properties remains strong – NTUC, which paid S$2,249psf for a 999-year LH office
building on top of Raffles Place MRT (Hitachi Tower) in January, has paid S$2,300psf
for a 99-year LH office building at Church Street (Capital Square) in March. It was also
reported that a REIT was doing due diligence to buy One Finlayson Green for
S$221mn but the building was subsequently sold for S$227mn (One Finlayson Green
sold to private group for S$227mn, Business Times, 22 March 2011).
Exhibit 41. Comparative value – Singapore vs Hong Kong
(%)
Difference SG CBD rents and HK Central
60
40
Singapore more expensive than HK
20
0
(20)
(40)
(60) HK more expensive than Singapore

(80)
Dec-87
Dec-88
Dec-89
Dec-90
Dec-91
Dec-92
Dec-93
Dec-94
Dec-95
Dec-96
Dec-97
Dec-98
Dec-99
Dec-00
Dec-01
Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Source: Jones Lang LaSalle, Nomura research
Pre-commitments provided the catalysts for office landlords to perform last year and
while leasing momentum is expected to slow this year the asking rents remain firm. For
example we believe MBFC tower 3 and Ocean Financial Centre are 66% and 80%
pre-committed. Asking rents in these IGA buildings have also increased to about S$13
to 15 psf. We believe transactional benchmarks will provide the catalysts for the office
landlords to continue their performance, as competition for investment grade assets
keeps cap rates low.
Against this backdrop, we prefer stocks with high exposure to the office market and
low exposure to the residential market. We like Keppel Land (KPLD SP) for its office
exposure and the commercial office REITS CCT SP, KREIT SP and SUN SP. Among
the developers, we like UOL SP for its office exposure and given that it has divested
most of its property projects and looks well positioned to replenish its land bank are
reasonable prices.

Offshore (Bullish) — Lisa Lee

We maintain our bullish stance in 2Q11F, and believe that these stocks will continue to We maintain Bullish stance on
outperform the market, underpinned by a more pronounced rig-building cycle upturn. Offshore
We look for semi-sub order momentum to return in 2Q/3Q along with the uptrend in
drillship ASPs and a potential tightening of the charter market led by spill-over demand
from Petrobras.
Exhibit 42. Vessel deliveries

Vessels delivered Delivery schedule beginning 3Q12
1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
Keppel 3JU 1JU, 2JU, 2JU, 2SS 1JU, 2JU, 1 JU in 4Q12 2JU 3JU 1JU 2JU 1JU
FELS 2SS 1SS 2SS 2SS 1SS 4 JU in 2H12
1SS in 3Q12
(15 outstanding JU options)
Keppel 1JU 1JU 1JU 1JU 1JU 1 JU
AmFELS
Jurong 1SS 1SS 1SS 1SS 2SS 2JU 1JU 1JU 2 JU 1 JU
Shipyard (6 outstanding JU options)
(SMM)
PPL 1JU 1JU 1JU 1JU 2JU 3JU 1 JU 1JU 1JU
Shipyard (2 outstanding JU options)
(SMM)
JU: Jack-up, SS: Semisub; DS: Drillship
Exhibit 43. Global jackup age profile Exhibit 44. Global semisub age profile
# of units # of units 70
250 70
57
195 60
200
50
144
150 40 34
97 30 26
100 18
56 20 11
50 7
18 12 10 1 2
4 9 7
0 0
yr
r
yr
yr
n
yr
yr
yr
yr
+y
io
r
yr
yr
yr
yr
yr
yr
yr
n
+y
10
<1
ct
30
io
1-
-1
-2
-2
-3
<1
10
5
ru
ct
30
6-
1-
-1
-2
-2
-3
11
16
21
26
ru
st
6-
11
16
21
26
on
st
on
c
er
c
nd
er
nd
U
U
Source: Rigzone, Nomura research Source: Rigzone, Nomura research
We believe the tightening of shipyard capacity is supportive of a potential ASP uptrend

(hence margin expansion beyond 2013), which is a key sign of a more pronounced rig-
building cycle upturn. Notably, the pricing of Keppel’s KFELS B class jack-ups has
increased by 17% over a short span (October 2010 – March 2011), reaching a level
close to the 2007/08 boom. While the specifications of the newer generation rigs are
higher, we believe any incremental cost increase will be partially offset by continued
efficiency gains. Barring any significant currency, material and equipment price
fluctuations, we look for overall rig-building margins to be restored in 2013F after the
imminent dip in 2011/12.
While Korean shipyards have been aggressive in pursuing orders for drillships, which
have an edge over semisubs in terms of flexibility, we believe semisub orders will
materialize in 2H11 owing to: 1) a further increase in drillship ASP (+11% since 4Q10);
and 2) potential tightening of the underlying charter market, driven by Petrobras’ spill-
over demand and the resumption of drilling permit approvals in Gulf of Mexico.
We reiterate our top BUY – Keppel. Management believes order momentum could be
sustained over several years on the back of replacement demand and remains
optimistic on taking on more orders as its capacity is only starting to see the recovery.

The group is refreshing its strategy to optimize capacity and capabilities across the
globe.
While SMM has lagged KEP in terms of new orders in 1Q (S$1.6bn vs Keppel’s BUYs: KEP, SMM, YZJ
S$4.4bn), we believe SMM remains very competitive. In particular, we highlight that its
PPL Shipyard offers capacity upside for jack-up deliveries in 2013, which is a positive
for order negotiations in the next two quarters. Its Tuas yard will come into partial
operations in 2H12, potentially raising the group’s dock capacity by 62% by 2013,
which will allow SMM to take on more ship-repair and newbuilding work.
Within the China shipbuilding space, we continue to like YZJ which stands out for its
well-entrenched containership franchise. Its discussions with Seaspan for a potential
US$2.2bn order (22x 10,000TEU containerships, including options) are arguably well-
known to the market but not priced in as we believe investors remain sceptical on the
risk-reward. While margins will be low, we believe a potential win will be a significant
breakthrough for YZJ, which positions it well for an eventual shipbuilding upturn as the
industry trending towards large, fuel-efficient ships.

Telcos – Sachin Gupta

In the regional context, the Singaporean telcos will see relatively higher competition - Singaporean telcos will see
be that from the NBN (National Broadband Network) rollout or from the impact of relatively higher competition
content cross-carriage measures in our view. Moreover, we think subsidies will likely
remain high in order to win and attract the incremental wireless and broadband
subscribers.
While SingTel remains a solid defensive franchise with good cash generation, SingTel: NEUTRAL
earnings volatility will be high in most of its key markets in our view. India, Indonesia
and the Philippines are seeing much more competition this year, as is Singapore and
Optus from a reinvigorated Telstra (NEUTRAL). It is not a given that SingTel and its
associates will lose share — but defending share will cost some profitability in our view.
We think a large capital return in May 2011 will be a key event; otherwise, we don't see
other catalysts to break the trading range of S$2.80-3.40. Maintain NEUTRAL with
S$3.35 price target.
We think 2011 will be a key year for M1 — it has the potential to transition from a pure M1: BUY
wireless carrier to become a more integrated fixed broadband and pay-TV player with
regulations in its favour. We expect M1 to surprise on net-adds without significant
incremental costs. We think execution will be the biggest challenge and no doubt the
incumbents won’t cede share easily, but we think M1 will use a low-price strategy to
win stand-alone broadband customers. Acquiring customers who are seeking bundled
products could be a more difficult task. Either way, however, we see little revenue
cannibalisation risks and incremental customers should add to the bottom line.
Maintain BUY with S$2.95 price target.
It is difficult to see StarHub matching its strong outperformance of 2010 in 2011. Its StarHub — REDUCE
strong 7.4% dividend yield (FY11–12F) could be overshadowed by earnings risks from:
1) NBN impact on retail broadband prices; 2) risks to bundled pay-TV subs from
competition along with the possible impact of content cross-carriage measures; and 3)
expensive-looking valuations of 16.4x FY11F P/E. We do expect it to win enterprise
revenue share from NBN, but it is more likely to make meaningful contribution only
from 2012F onwards. Maintain REDUCE with S$2.30 PT.
Exhibit 45. VMs and risks – telcos

Valuation method Investment risks
SingTel (ST SP) DCF SOTP – average WACC of 8.26% for Downside: more aggressive competition in the domestic market
Singapore and Optus businesses, with terminal and a macro slowdown, further appreciation of the Singapore
growth rate of 2.5%. Our discount rates for its dollar and slowing growth at associates.
associates are 10-12%, with terminal growth Upside: better-than-expected operational trends and any capital
rates ranging from 2 to 4% management initiatives
StarHub (STH SP) DCF (WACC: 8.1%, terminal growth = 1%) Upside: lower-than-expected loss of pay-TV subscribers, limited
ARPU dilution, higher-than-expected capital management
M1 (M1 SP) DCF (WACC: 7.7%, Ke=10%, Kd=3%, terminal Downside: more aggressive competition in Singapore, limited
growth = 1%) ability to offer fixed mobile bundles, macro slowdown in
Singapore

Economics
Inflation fighting
Euben Paracuelles / Yougesh Khatri
The government has adopted tighter policies including measures to cool the property
market and a contractionary fiscal stance. We expect another FX policy move in April.
For Singapore, Q1 GDP flash estimates (which we expect to be released around the Q1 GDP flash estimates (which we
week of 11 April) are likely to post growth of 5.6% y-y from 12% in the previous quarter. expect to be released around the
The industrial production index (IPI) eased to 4.8% in February after rising 11% in week of 11 April) are likely to post
January. The slowdown was again driven by a decline in biomed on a y-y basis. growth of 5.6% y-y from 12% in
the previous quarter
Excluding biomed, IPI seems to be holding up – our momentum indicator shows a
considerable pickup starting in January (next Exhibit, left), in line with a significant
pickup in manufacturing PMI and strong non-electronics exports.
This remains consistent with our full year 2011 growth forecast of 5.3% (versus the
government’s 4-6% target). After a stellar recovery, the economy is likely operating at
or close to full potential and we expect growth to revert to the 5-6% medium-term trend
which, for an advanced economy, is still impressive. However, taking into account the
potential impact of the Japan earthquake, we have revised the path of our quarterly
growth forecast for this year: we now see weaker Q2 growth owing to possible supply
disruption but stronger Q4 growth as Japan starts reconstruction.
Given the relatively robust growth picture, the authorities are focused on containing The authorities are focused on
inflation from several fronts. The Monetary Authority of Singapore (MAS) announced containing inflation from several
fronts
moves to appreciate the SGD nominal effective exchange rate (NEER) both in April
and October last year. These moves put further downward pressure on record-low
SGD short-term rates, likely contributing to property price pressures (and asset bubble
concerns). On 13 January, in a bid to cool property markets, the government
introduced further — and more stringent than expected — measures, including
increasing the holding period to impose the seller’s stamp duty (SSD) to four years,
raising maximum SSD rates to 16% and reducing limits to loan-to-value ratios further.
The most recent property price indices suggest these cooling measures may be
beginning to work.
But there is likely more tightening of monetary conditions ahead, in our view. After
surging to 5.5% in January, headline CPI inflation eased to 5.0% in February. We
believe inflation has peaked but it is still likely well above the authorities’ comfort zone.
We maintain our 2011 CPI inflation forecast of 4.5%, above the MAS 3-4% forecast
range. The trajectory of our forecast suggests that inflation will remain persistently high
in H1 before easing in H2. Even so, we do not expect inflation to fall as sharply to
range 2.5-3.0% in H2 implied by MAS’ forecast for the year.
Exhibit 46. Industrial output ex-biomed Exhibit 47. Headline and underlying CPI inflation
% %3m-on-3m annualized, sa pp Transport
6
60 % y-o-y Housing
5 Food
40 CPI inflation (%y-o-y)
4 Underlying inflation (%y-o-y)
20
3
0
2
-20
1
-40
0
-60 -1
-80 -2
Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11
Source: CEIC, Nomura Global Economics Source: CEIC, Nomura Global Economics

There are also upside risks to inflation from developments in the Middle East and the
related impact on oil prices, and from supply-side bottlenecks in Japan, lifting the
prices of electronic goods. Brent crude oil prices have averaged USD105/bbl in Q1 so
far (Bloomberg data), exceeding our assumption of USD102. Electricity tariffs for Q2
have been raised another 6.5%, nearly twice the 3.3% increase in Q1. Car COE prices
also bounced back in March auctions by an average 4.0%, despite their tendency to
remain stable (if not decline) after the Chinese New Year holiday. Food, housing and
transport costs are likely to remain large contributors to headline inflation.
Against this backdrop we continue to expect the MAS to move to further appreciate the We expect the MAS to further
SGD NEER in April, albeit with a probability of still around 55% (see SGD – Half-time appreciate the SGD NEER in April,
(policy) report, 20 January 2011). Underlying inflation has eased and is now below the albeit with a probability of still
around 55%
MAS’ 2-3% forecast range and we flag uncertainty about the external environment;
these are key risks to this view (and therefore make it a close call). But we judge that
because of the impact on inflation expectations, headline inflation remains the key
policy consideration. The other risk is if the string of property market measures hurts
growth sharply, although any evidence of this will likely come with a significant lag.
The 2011 budget envisages an overall fiscal surplus of 0.1% of GDP from a smaller- The 2011 budget envisages an
than-budgeted deficit of 0.3% of GDP in FY10, unveiling measures that build on the overall fiscal surplus of 0.1% of
theme of raising long-term productivity, but also providing one-off transfers to GDP from a smaller-than-
budgeted deficit of 0.3% of GDP in
households and SMEs ahead of a likely election this year. On our estimates, this
FY10
would imply a slightly contractionary fiscal stance, consistent with the government’s
efforts to contain inflation, in concert with monetary tightening and other property
sector measures.
Risks: Downside risks are a renewed slump in the global economy, a further surge in
oil prices, prolonged unrest in the Middle East and a sustained supply-chain disruption
after the earthquake in Japan. Potential large-scale capital inflows raise the risk of
asset bubbles.
Exhibit 48. Singapore: economic forecasts

% y-y growth unless otherwise stated 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 2010 2011 2012
Real GDP 10.6 12.0 5.6 4.1 5.6 6.1 4.8 5.0 14.5 5.3 5.8
Private consumption 5.2 4.3 5.5 4.7 5.0 5.0 4.1 5.7 4.2 5.0 6.1
Government consumption 7.5 11.3 5.0 7.0 5.0 5.0 9.1 14.6 11.0 5.4 10.4
Gross fixed capital formation 5.6 5.7 12.0 12.0 11.0 11.0 4.7 6.9 5.1 11.5 10.2
Exports (goods & services) 20.4 12.1 7.0 7.0 7.8 8.1 6.0 6.1 19.2 7.5 6.6
Imports (goods & services) 17.4 12.8 8.2 8.6 9.2 9.2 8.0 9.0 16.6 8.8 9.2
Contributions to GDP:
Domestic final sales 4.2 4.3 5.8 4.9 4.9 5.0 4.1 4.8 4.2 5.2 5.9
Inventories (3.7) 5.2 0.1 (0.1) 0.7 0.6 2.2 1.5 1.1 0.3 2.4
Net trade (goods & services) 11.4 2.6 (0.3) (0.7) (0.1) 0.4 (2.4) (3.8) 10.5 (0.2) (3.1)
Unemployment rate (sa, %) 2.1 2.2 1.9 1.8 1.7 1.8 2.0 2.0 2.2 1.8 2.0
Consumer prices index 3.4 4.0 5.7 5.1 4.1 3.2 2.1 3.3 2.8 4.5 3.4
Exports 27.3 22.5 16.5 14.4 12.0 6.5 13.7 12.6 30.4 12.1 12.8
Imports 22.5 17.3 25.6 20.9 24.2 14.4 13.7 13.5 26.4 21.1 13.8
Merchandise trade balance (US$bn) 11.7 13.0 1.9 5.6 3.2 7.4 2.1 5.5 41.1 18.1 16.8
Current account balance (% of GDP) 23.4 19.0 14.5 18.2 24.0 17.5 13.3 15.5 22.0 18.4 16.5
Fiscal balance (% of GDP) (0.1) 0.0 0.4
3 month SIBOR (%) 0.51 0.44 0.40 0.40 0.40 0.40 0.40 0.40 0.44 0.40 0.40
Exchange rate (SG$/US$) 1.32 1.28 1.25 1.23 1.22 1.21 1.20 1.19 1.28 1.21 1.16
Notes: Numbers in bold are actual values; others forecast. Interest rate and currency forecasts are end of period; other measures are period average. All forecasts are
modal forecasts (i.e., the single most likely outcome). Table last revised 25 March 2011.
Source: CEIC and Nomura Global Economics

CONVICTION CALL CONVICTION CALL CONVICTION CALL CONVICTION CALL
OCBC O C B C S P
F I N AN C I AL S / B AN K S | S I N G AP O R E Maintained
Anand Pathmakanthan, CFA +65 6433 6986 anand.pathmakanthan@nomura.com

BUY
 Action Closing price on 30 Mar S$9.46
We reaffirm our recommendation of OCBC as a core holding, underpinned by its Price target S$11.80
(set on 11 Aug 10)
continued diversification from the growth- and margin-challenged S$ loan space, and Upside/downside 24.7%
given increasingly tangible synergies between its wealth management and commercial Difference from consensus 9.3%
bank platforms. With management execution and balance-sheet trends strong, we think
FY12F net profit (S$mn) 2,830
OCBC has the sector’s best premium-generating growth-quality balance. BUY.
Difference from consensus 5.2%
 Catalysts Source: Nomura
Seamless integration of, and tangible synergies from, Bank of Singapore; market
re-rating of Great Eastern; raising of Bank of Ningbo stake to 20% (from 13.7%). Nomura vs consensus
Anchor themes Capacity to extract revenue and cost
Incentives to transform Singapore into a global city and diversify the economy, eg, synergies from an expanding wealth
development of integrated resorts and broadening of services and manufacturing management platform, and maintain
sectors, remain well-supported and broadly complemented by substantial fiscal and a sector-low NPL ratio, loan-loss
monetary support, which has supported employment and broad domestic demand. provisioning may be underestimated.
All the right trends

Key financials & valuations
31 Dec (S$mn) FY10 FY11F FY12F FY13F
PPOP - - - -
 Operating platform: positive structural evolution Reported net profit

Normalised net profit
2,253
2,253
2,472
2,472
2,830
2,830
3,122
3,122
We forecast loan growth will moderate to 14% in FY11F, after a jump Normalised EPS (S$) 0.68 0.74 0.85 0.93
of 30% in FY10 (23% ex consolidation of Bank of Singapore [BOS]) — Norm. EPS growth (% ) 10.5 8.2 14.5 10.3
Norm. P/E (x) 14.0 12.8 11.2 10.1
credit demand indicators are broadly healthy, particularly in targeted Price/adj. book (x) 1.67 1.58 1.46 1.35
sectors, eg, oil & gas, plantations. Group NIM stability is underpinned Price/book (x) 1.52 1.43 1.33 1.24
by more efficient (higher) LDR, faster growth in higher-margin Dividend yield (%) 3.2 3.6 4.0 4.4
RO E (%) 11.3 11.5 12.3 12.7
Malaysian and Indonesian loans, and sustained pick-up in CASA RO A (%) 1.06 1.02 1.05 1.06
share of deposits, the latter having shown a consistent q-q increase Earnings r evisions
since 1Q08 to the current record of 49.5%. The wealth management Previous norm. net profit 2,472 2,830 3,122
Change from previous (% ) - - -
division, underpinned by Great Eastern (GE) and private bank BOS, is Previous norm. EPS (S$) 0.74 0.85 0.93
generating tangible cross-platform revenue and cost synergies, and Sou rce: Comp any, Nom ura estim ates
has strong momentum — BOS grew AUM by 18% in FY10 to

US$26bn, with a target of US$45bn by FY14F, while GE is reinforcing Share price relative to MSCISG
its ASEAN leadership with rapid growth in Indonesia and a Takaful JV (S$) Price Rel MSCISG
11 110
in Malaysia.
10
105
10
 Balance sheet: capital overhang lifted 9 100
9
A well-received scrip dividend scheme and more efficient risk- 95
8
weighted asset (RWA) modelling have resulted in core equity ratio 8 90
Mar10
Apr10
May10
Jun10
Oc t10
J an11
Feb11
rising 50bps y-y to 12.5% as of 4Q10, despite an 18% y-y increase in

Jul10
Aug10
Sep10
Nov 10
Dec10
group assets. With the full BASEL III impact to amount to a c.200bp
1m 3m 6m
deduction, on our estimates, capital does not appear to be a Absolute (S$) 2.3 (5.4) 6.9
constraint, with confidence underscored by OCBC being the only Absolute (US$) 3.0 (3.3) 11.3
Singapore bank to raise ordinary dividends in FY10. Relat ive to Index 0.6 (0.8) 7.9
Mark et cap (U S$mn) 24,997
 Valuation: adjusted earnings, maintaining PT Estimated free float (% )

52-week range (S$)
70.0
10.32/8.10
Following the FY10 results, we adjusted earnings 1-6% lower (29 3-mth avg daily turnover (US$mn) 38.45
Stock borrowability Easy
March), primarily to account for extended NIM sluggishness as
Major shareholders (% )
interest rates remain near lows. Our SOTP-based PT (methodology Lee F amily 31.0
unchanged: valuing GE at 1.5x embedded value and the commercial
Sou rce: Comp any, Nom ura estim ates
bank at 1.8x book) is S$11.80, or 2.0x FY11F adjusted book (1.8x
stated book) or 16x FY11F earnings. Key risk: weak execution in
integrating the various operating platforms could hurt profitability and
asset quality.

OCBC Anand Pathmakanthan, CFA
Financial statements
Profit and Loss (S$m n)
Year-end 31 Dec FY09 FY10 FY11F FY12F FY13F
Interest income 4,184 4,363 5,033 6,114 6,996
Interest expense (1,359) (1,416) (1,573) (2,102) (2,397)
Net interest incom e 2,825 2,947 3,460 4,011 4,599
Net fees and commissions 730 994 1,122 1,262 1,422
Trading related profits 285 433 459 506 555
Other operating revenue 975 951 1,000 1,112 1,239
Non-interest incom e 1,990 2,378 2,581 2,881 3,216
Operating incom e 4,815 5,325 6,042 6,892 7,814
Depreciation (58) (73) (79) (85) (92)
Amortisation (47) (55) (55) (55) (55)
Operating expenses (1,737) (2,181) (2,509) (2,864) (3,239)
Em ployee share expense
Op. profit before provisions 2,972 3,016 3,399 3,888 4,429
Provisions for bad debt (429) (134) (183) (214) (370)
Other provision charges - - - - -
Operating profit 2,543 2,882 3,216 3,674 4,059
Other non-operating income - - - - -
Associates & JCEs (1) (2) 2 4 8
Pre-tax profit 2,543 2,880 3,218 3,678 4,067
Income tax (389) (433) (523) (597) (658)
Net profit after tax 2,154 2,447 2,694 3,081 3,408
Minority interests (192) (194) (222) (251) (286) PPOP growth set to regain
Other items - - - - - momentum as NIM and cost
base stabilise, even as loan
Preferred dividends - - - - -
growth and fee income show
Norm alised NPAT 1,962 2,253 2,472 2,830 3,122
sustained strong expansion
Extraordinary items 21 - - - -
Reported NPAT 1,983 2,253 2,472 2,830 3,122
Dividends (909) (1,002) (1,136) (1,270) (1,403)
Transfer to reserves 1,074 1,251 1,337 1,560 1,719
Valuation and ratio analysis

FD normalised P/E (x) 15.6 14.0 12.8 11.2 10.1
FD normalised P/E at price target (x) 19.5 17.5 15.9 13.9 12.6
Reported P/E (x) 15.1 13.8 12.8 11.2 10.1
Dividend yield (%) 3.0 3.2 3.6 4.0 4.4
Price/book (x) 1.6 1.5 1.4 1.3 1.2
Price/adjusted book (x) 1.7 1.7 1.6 1.5 1.4
Net interest margin (%) 2.23 2.03 2.02 2.07 2.14
Yield on interest earning assets (%) 3.30 3.00 2.94 3.15 3.25
Cost of interest bearing liabilities (%) 1.13 1.04 0.98 1.17 1.23
Net interest spread (%) 2.17 1.96 1.96 1.98 2.02
Non-interest/operating income (%) 41.3 44.7 42.7 41.8 41.2
Cost to income (%) 37.3 42.3 42.8 42.8 42.6 Cost-to-income ratio to remain
Effective tax rate (%) 15.3 15.0 16.3 16.2 16.2 around post-BOS stepped-up
Dividend payout (%) 45.8 44.5 45.9 44.9 44.9 level due to higher related
ROE (%) 11.4 11.3 11.5 12.3 12.7 opex and capex cost base
ROA (%) 1.06 1.06 1.02 1.05 1.06
Operating ROE (%) 14.6 14.5 15.0 16.0 16.5
Operating ROA (%) 1.35 1.36 1.32 1.36 1.38
Grow th (%)
Net interest income 1.5 4.3 17.4 15.9 14.6
Non-interest income 35.4 19.5 8.6 11.6 11.6
Non-interest expenses (3.1) 25.5 15.1 14.1 13.1
Pre-provision earnings 26.4 1.5 12.7 14.4 13.9
Net profit 32.0 14.8 9.7 14.5 10.3
Normalised EPS 28.8 10.5 8.2 14.5 10.3
Normalised FDEPS 25.7 11.5 9.7 14.5 10.3
So urce: No mura estimates

OCBC Anand Pathmakanthan, CFA
Balance Sheet (S$m n)

As at 31 Dec FY09 FY10 FY11F FY12F FY13F
Cash and equivalents 7,244 6,321 8,229 9,756 8,573
Inter-bank lending 15,821 18,569 20,426 22,469 24,716
Deposits w ith central bank 5,927 5,172 6,733 7,982 7,014
Total securities 28,166 31,357 35,918 40,878 45,975
Other interest earning assets - - - - -
Gross loans 82,341 106,449 121,352 135,914 149,506
Less provisions (1,465) (1,460) (1,705) (1,915) (2,114)
Net loans 80,876 104,989 119,647 133,999 147,392
Long-term investments 7,453 9,035 9,757 10,538 11,381
Fixed assets 2,374 2,358 2,338 2,318 2,298
Goodw ill 3,362 3,996 3,941 3,886 3,831
Other intangible assets - - - - -
Other non IEAs 43,077 47,486 49,385 51,361 53,415
CASA share has consistently
Total assets 194,300 229,283 256,375 283,188 304,596 grown q-q to a record 49.5%
Customer deposits 100,633 123,300 142,012 159,621 176,521 currently (vs 28% in FY06;
Bank deposits, CDs, debentures 14,877 21,070 21,755 22,280 22,857 overtook UOB in 2Q10)
Other interest bearing liabilities 6,863 6,853 6,853 6,854 1,094
Total interest bearing liabilities 122,373 151,224 170,621 188,755 200,472
Non interest bearing liabilities 50,148 54,414 60,544 67,405 75,085
Total liabilities 172,521 205,638 231,165 256,160 275,557
Minority interest 2,808 2,855 3,077 3,328 3,614
Common stock 6,210 7,045 7,045 7,045 7,045
Preferred stock 1,166 1,166 1,166 1,166 1,166
Retained earnings 9,103 10,592 11,935 13,501 15,227
Proposed dividends - - - - -
Other equity 2,492 1,987 1,987 1,987 1,987
Shareholders' equity 18,971 20,790 22,133 23,699 25,425
Total liabilities and equity 194,300 229,283 256,375 283,188 304,596
Non-performing assets (S$) 1,384 995 1,095 1,314 1,708
Balance sheet ratios (%)

Loans to deposits 81.8 86.3 85.5 85.1 84.7
Equity to assets 9.8 9.1 8.6 8.4 8.3
Asset quality & capital

NPAs/gross loans (%) 1.7 0.9 0.9 1.0 1.1
Bad debt charge/gross loans (%) 0.52 0.13 0.15 0.16 0.25
Loss reserves/assets (%) 0.75 0.64 0.66 0.68 0.69
Loss reserves/NPAs (%) 105.9 146.7 155.7 145.8 123.8
Tier 1 capital ratio (%) 16.0 16.3 16.0 15.9 16.4
Total capital ratio (%) 16.5 17.6 17.5 17.7 18.3
Improved despite rapid asset
Grow th (%) growth, underpinned by scrip
dividend scheme (>80% rate
Loan grow th 1.3 29.8 14.0 12.0 10.0
of acceptance) and relatively
Interest earning assets 6.8 22.4 14.1 12.4 9.6
moderate risk-weighted asset
Interest bearing liabilities 3.8 23.6 12.8 10.6 6.2 (RWA) growth
Asset grow th 7.1 18.0 11.8 10.5 7.6
Deposit grow th 7.0 22.5 15.2 12.4 10.6
Per share
Reported EPS (S$) 0.63 0.68 0.74 0.85 0.93
Norm EPS (S$) 0.62 0.68 0.74 0.85 0.93
Fully diluted norm EPS (S$) 0.60 0.67 0.74 0.85 0.93
DPS (S$) 0.28 0.30 0.34 0.38 0.42
PPOP PS (S$) 0.94 0.92 1.02 1.16 1.33
BVPS (S$) 5.85 6.22 6.62 7.09 7.61
ABVPS (S$) 5.72 5.65 6.01 6.48 6.99
NTAPS (S$) 4.81 5.03 5.45 5.93 6.46

DBS Group Holdings D B S S P
F I N AN C I AL S / B AN K S | S I N G AP O R E Maintained
Anand Pathmakanthan, CFA +65 6433 6986 anand.pathmakanthan@nomura.com

BUY
Tangible traction leveraging core franchise strengths (ie, S$ deposits, Greater Price target S$16.70
(set on 28 Mar 11)
China integration) and building the execution platform for regional growth initiatives Upside/downside 15.0%
(ie, SME, wealth management) should deliver substantial restructuring gains over Difference from consensus -1.8%
the medium term. With its NIM bottoming out and balance sheet solid, DBS looks
overly discounted, with the lowest P/BV multiple and top-tier yield vs ASEAN peers.
Tangible delivery on new CEO’s strategic initiatives, interest rate uptrend, greater
Nomura vs consensus
regional operational integration, especially HK-China, and synergistic acquisitions.
Ability to sustain group cost-income
Anchor themes
ratio below the guided 45% mark may
Incentives to transform Singapore into a global city and diversify the economy, such be underestimated given strong
as development of integrated resorts, broadening of services and manufacturing operating income drivers, especially
sectors, remain well-supported and broadly complemented by substantial fiscal and loan volumes and treasury-driven
monetary support, which has supported employment and broad domestic demand. trading income.
Closing the execution gap

PPOP - - - -
Reported net profit 1,632 2,911 3,307 3,688
 Operational momentum: picking up across a broad front Normalised net profit 2,650 2,911 3,307 3,688
A broad regional capex activity pick-up and rising intra-Asia Normalised EPS (S$) 1.15 1.26 1.43 1.60
Norm. EPS growth (% ) 6.3 9.2 13.6 11.5
investment flows look to dovetail with DBS’ regional infrastructure, Norm. P/E (x) 12.7 11.5 10.1 9.1
underpinning our forecast for low/mid-teen FY11F loan growth (FY10: Price/adj. book (x) 1.47 1.38 1.28 1.19
Price/book (x) 1.26 1.20 1.12 1.05
+16%). With over 80% of its S$ funding base composed of sticky,
Dividend yield (%) 3.9 4.0 4.4 4.8
relatively interest rate-insensitive CASA, DBS is leveraging this RO E (%) 6.3 10.7 11.4 11.9
competitive edge to grow higher-margin, fixed-rate mortgage and RO A (%) 0.60 0.99 1.03 1.07
Earnings r evisions
corporate lending, boosting market share, customer acquisition and
Previous norm. net profit 2,911 3,307 3,688
ROA as LDR gains traction. Long-suffering DBS (HK), 20% of total Change from previous (% ) - - -
group assets, is enjoying the tailwinds of surging financing demand Previous norm. EPS (S$) 1.26 1.43 1.60
from mainland Chinese corporates and RMB-linked treasury income.
Revamped regional SME and wealth management operations are Share price relative to MSCISG
slated to launch in 2H11.
(S$) Price Rel MSCISG
16 110
 Margin, costs: still some pain before gain 16 105

15 100
With S$ interest rates remaining soft, management expects multi-year 15 95
14 90
margin (NIM) weakness to bottom out in mid-2011. In our view,
14 85
improving asset-liability dynamics and an uptrend in rates from 2H11 13 80
should lift NIM into FY12. We estimate a 100bps rise in SIBOR boosts
Mar10
Apr10
May10
Jun10
Oc t10
J an11
Feb11
Jul10
Aug10
Sep10
Nov 10
Dec10
FY11F PBT by 12% on an annualised basis. While the cost-income

1m 3m 6m
ratio looks set to rise given the regional investments, we expect it to Absolute (S$) 2.5 0.1 3.1
top out below the guided 45% level on a robust operating income Absolute (US$) 3.2 2.3 7.3
outlook. Relat ive to Index 0.9 4.9 3.9
Estimated free float (% ) 72.0
 Valuations: overly discounted, with top-tier yield 52-week range (S$) 15.58/13.26
3-mth avg daily turnover (US$mn) 57.3
Following the FY10 results, our forecasts are little changed as NIM Stock borrowability Easy
and cost pressures are mitigated by better volume and non-interest Major shareholders (% )
income trends. We maintain our Gordon growth PT (12% sustainable Temasek Holdings 30.0
ROE, 9.5% cost of capital and 5% long-term growth) of S$16.70 or Sou rce: Comp any, Nom ura estim ates
1.6x FY11F adjusted book value (1.4x stated book value), or 15x
FY11F earnings. Key risk: a double-dip scenario that erodes loan growth, NIM and
asset quality, and upsets execution on strategic initiatives.

DBS Group Holdings Anand Pathmakanthan, CFA
Profit and Loss (S$m n)
Interest income 6,114 5,699 6,187 7,069 7,968
Interest expense (1,660) (1,381) (1,542) (1,839) (1,980)
Net interest incom e 4,454 4,319 4,645 5,230 5,988
Net fees and commissions 1,394 1,397 1,490 1,591 1,699
Trading related profits 687 1,205 1,376 1,592 1,809
Other operating revenue 68 145 159 173 189
Non-interest incom e 2,149 2,747 3,025 3,356 3,697
Operating incom e 6,603 7,066 7,670 8,586 9,685
Depreciation (157) (173) (181) (190) (200)
Amortisation - - - - -
Operating expenses (2,447) (2,752) (3,078) (3,373) (3,700)
Em ployee share expense
Op. profit before provisions 3,999 4,141 4,410 5,022 5,785
Provisions for bad debt (1,529) (911) (736) (854) (1,139)
Other provision charges - - - - - PPOP momentum sustained
Operating profit 2,470 3,230 3,674 4,168 4,646 as loan and non-interest
Other non-operating income - - - - - income volumes stay strong
Associates & JCEs 66 102 112 123 136
even as NIM bottoms out
Pre-tax profit 2,536 3,332 3,786 4,291 4,782
Income tax (285) (454) (625) (709) (790)
Minority interests (187) (228) (251) (276) (303)
Other items - - - - -
Norm alised NPAT 2,064 2,650 2,911 3,307 3,688
Extraordinary items (23) (1,018) - - -
Reported NPAT 2,041 1,632 2,911 3,307 3,688
Dividends (1,278) (1,294) (1,340) (1,478) (1,616)
Transfer to reserves 763 338 1,571 1,829 2,073

Reported P/E (x) 13.5 20.4 11.5 10.1 9.1
Dividend yield (%) 3.9 3.9 4.0 4.4 4.8
Price/book (x) 1.3 1.3 1.2 1.1 1.0
Price/adjusted book (x) 1.4 1.5 1.4 1.3 1.2
Net interest margin (%) 2.06 1.82 1.79 1.86 1.97
Yield on interest earning assets (%) 2.82 2.41 2.39 2.51 2.62
Cost of interest bearing liabilities (%) 0.86 0.65 0.66 0.72 0.72
Net interest spread (%) 1.96 1.75 1.72 1.79 1.90
Non-interest/operating income (%) 32.5 38.9 39.4 39.1 38.2
Cost to income (%) 39.4 41.4 42.5 41.5 40.3
Effective tax rate (%) 11.2 13.6 16.5 16.5 16.5 Medium-term ROE target is
12%. DBS (HK) has a more
Dividend payout (%) 62.6 79.3 46.0 44.7 43.8
aggressive 12-15% target,
ROE (%) 9.0 6.3 10.7 11.4 11.9
with underlying ROA to be
ROA (%) 0.79 0.60 0.99 1.03 1.07 lifted to 1.3% (FY10: 1.1%)
Operating ROE (%) 10.9 12.4 13.5 14.4 15.0
Operating ROA (%) 0.96 1.19 1.24 1.30 1.35
Grow th (%)
Net interest income 3.6 (3.1) 7.6 12.6 14.5
Non-interest income 22.6 27.9 10.1 11.0 10.2
Non-interest expenses (0.2) 12.5 11.8 9.6 9.7
Pre-provision earnings 16.1 3.6 6.5 13.9 15.2
Net profit (0.7) 28.4 9.8 13.6 11.5
Normalised EPS (20.5) 6.3 9.2 13.6 11.5
Normalised FDEPS (33.8) 26.8 9.8 13.6 11.5

DBS Group Holdings Anand Pathmakanthan, CFA
Balance Sheet (S$m n)

Cash and equivalents 2,252 3,120 3,414 3,693 3,840
Inter-bank lending 22,203 20,306 18,275 16,448 14,803
Deposits w ith central bank 20,264 28,083 29,556 30,186 29,421
Total securities 52,948 48,275 52,137 56,308 60,813
Other interest earning assets - - - - -
Gross loans 132,809 154,325 172,844 193,586 212,946
Less provisions (2,837) (2,628) (2,842) (3,239) (3,522)
Net loans 129,972 151,697 170,002 190,347 209,424
Long-term investments 6,155 6,481 6,999 7,559 8,164
Fixed assets 1,532 1,383 1,433 1,483 1,533
Goodw ill 5,847 4,802 4,802 4,802 4,802
Other non IEAs 17,471 19,562 20,499 21,484 22,517
Total assets 258,643 283,709 307,119 332,311 355,317
Customer deposits 183,432 193,692 213,061 234,367 253,117 DBS took a S$1.02bn one-off
Bank deposits, CDs, debentures 9,108 18,811 19,940 21,136 22,405 impairment charge for DBS
(HK) in 2Q10; write-off has no
Other interest bearing liabilities 8,617 9,159 9,971 10,037 10,095
impact on capital ratios or
Total interest bearing liabilities 201,157 221,662 242,972 265,540 285,617 operational capacity while the
Non interest bearing liabilities 27,986 28,945 29,407 29,899 30,426 decline in book is mitigated by
Total liabilities 229,144 250,607 272,379 295,440 316,044 the parallel ROE increase
Common stock 8,369 8,533 8,533 8,533 8,533
Preferred stock 66 247 66 66 66
Other equity 6,765 7,000 7,000 7,000 7,000
Shareholders' equity 25,373 26,599 27,987 29,842 31,940
Total liabilities and equity 258,643 283,709 307,119 332,311 355,317
Non-performing assets (S$) 3,876 2,878 2,936 3,229 3,875
Balance sheet ratios (%)

Loans to deposits 72.4 79.7 81.1 82.6 84.1
Equity to assets 9.8 9.4 9.1 9.0 9.0
Asset quality & capital

NPAs/gross loans (%) 2.9 1.9 1.7 1.7 1.8
Bad debt charge/gross loans (%) 1.15 0.59 0.43 0.44 0.54
Loss reserves/assets (%) 1.10 0.93 0.93 0.97 0.99
Loss reserves/NPAs (%) 73.2 91.3 96.8 100.3 90.9
Tier 1 capital ratio (%) 13.1 15.1 15.1 15.3 15.5
Total capital ratio (%) 16.7 18.4 18.3 18.4 18.5
With the Middle East-related
loan loss provisioning
Grow th (%) completed, credit costs look set
Loan grow th 3.3 16.7 12.1 12.0 10.0 to decline towards guided
Interest earning assets 8.6 10.2 8.7 8.6 7.2 normalised 40bps level
Interest bearing liabilities 10.0 10.2 9.6 9.3 7.6
Asset grow th 0.7 9.7 8.3 8.2 6.9
Deposit grow th 12.3 5.6 10.0 10.0 8.0
Per share
Reported EPS (S$) 1.07 0.71 1.26 1.43 1.60
Norm EPS (S$) 1.09 1.15 1.26 1.43 1.60
DPS (S$) 0.56 0.56 0.58 0.64 0.70
PPOP PS (S$) 2.10 1.80 1.91 2.18 2.51
BVPS (S$) 11.13 11.52 12.12 12.92 13.83
ABVPS (S$) 10.15 9.90 10.51 11.31 12.22
NTAPS (S$) 8.56 9.44 10.04 10.84 11.75

Keppel Land K P L D S P
P R O P E R TY | S I N G AP O R E Maintained
Min Chow Sai +65 6433 6959 minchow.sai@nomura.com

BUY
Despite our cautious residential view, we highlight the stock’s defensiveness – high Price target S$5.56
(set on 17 Feb 11)
exposure to the SG office market and low exposure to the SG residential market.
Upside/downside 24.9%
The stock is trading at an implied EV of S$1,181psf for its SG office portfolio, which Difference from consensus 33.7%
we think is conservative. Maintain BUY.
FY12F net profit (S$mn) 480.0
 Catalysts Difference from consensus 4.1%
We expect Keppel Land to put its under-leveraged balance sheet to work for NAV- Source: Nomura
accretive opportunities over the next 12 months.

Nomura vs consensus
Anchor themes
Consensus valuations of KREIT in
Besides policy concerns, supply is a significant overhang on home prices, KPLD’s NAV may be pegged to its
especially in the prime luxury segment in the near term. Against such a physical current market price, which we
market outlook, residential developers are unlikely to outperform. Investors should believe undervalues its Singapore
focus on stocks with specific drivers/catalysts and trading at attractive valuations. office portfolio.

Undervalued office assets 31 Dec (S$mn)
Revenue
FY10 FY11F FY12F FY13F
792 1,120 1,450 1,750
Reported net profit 1,046 390 480 563
 Cautious home price assumptions Normalised net profit 244 390 480 563
Normalised EPS (S$) 0.17 0.27 0. 33 0.39
We are expecting mass-/mid-market home prices to remain largely flat Norm. EPS growt h (% ) (26.2) 58.6 23.1 17.2
in 2011-12F, before a 15% correction in 2013F, and prime luxury Norm. P/E (x) 26.3 16.6 13.5 11.5
EV/EBITD A (x) 18.4 13.8 11.0 9.1
prices to fall 10% in 2011-12F (flat in 2013F).
Price/ book (x) 1.5 1.4 1.3 1.2
Dividend yield (%) 4.0 2.0 2.0 2.0
 NAV recently raised S$0.06/share to S$5.56/share ROE (%) 22.5 7.9 9.1 9.8
Gearing (%) 30.2 27.7 25.3 23.2
We raised our NAV estimate for Keppel Land by S$0.06/share to
Earnings r evisions
S$5.56/share on 17 Feb 11. The impact from the changes in our Previous norm. net profit 390 480 563
home price assumptions (-S$0.09/share) is more than offset by the Change from previous (% ) - - -
Previous norm. EPS (S$) 0.27 0. 33 0.39
following changes: 1) a higher fair value for KREIT (from S$1.62 to
S$1.76; adds S$0.06/share to Keppel Land’s NAV), 2) estimated
gains from the recent divestment of Keppel Digihub to the 30:70 data Share price relative to MSCISG
centre JV with Keppel T&T (+S$0.05/share), 3) a higher valuation for
the fund management business (+S$0.02/share) and 4) better than 5.2 125
120
expected sales in China in 2010 (+S$0.02/share). 4.7 115
110
4.2
 Maintain BUY with a PT of S$5.56 105
100
3.7
Our valuation methodology remains unchanged, pegging our price 95
3.2 90
target to NAV, which translates into a FY11F P/B multiple 1.8x, vs the
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct 10
stock’s historical average 1.4x. Considering its high exposure to the

SG office market and low exposure to the SG residential market (with 1m 3m 6m
Absolute (S$) 3.7 (8.2) 9.9
about half of projected development profits secured by sales), we
Absolute (US$) 4.5 (6.2) 14.4
believe the premium is justified. On an implied EV basis, we estimate Relative to Index 2.1 (3.7) 11.0
the market is currently valuing the stock at c. S$1,181psf for its SG Mark et cap (U S$mn) 5,112
office portfolio, 80% of which is made up of OFC and MBFC Phase 2, Estimated free float (% ) 46.0
52-week range (S$) 5.05/ 3.44
while the 49% stake at Hitachi Tower recently transacted at
S$2,249psf. Maintain BUY with a PT of S$5.56. Risks to our Stock borrowability Easy
investment view: A worse-than-expected economic performance is Major shareholders (% )
likely to cause housing demand and leasing demand to slow, which is Keppel Corp 52.4
likely to widen the discount to NAV at which the stock trades, in our Sou rce: Comp any, Nom ura estim ates
view.

Keppel Land Min Chow Sai
Income statement (S$mn)
Investment properties 75 70 75 80 85
Property development 721 580 900 1,220 1,510
Hotels/serviced apartments 128 142 145 150 155
Other Revenue - - - - -
Revenue 924 792 1,120 1,450 1,750
EBIT contributions
Investment properties 44 44 50 53 57
Property development 125 122 219 299 371
Hotels/serviced apartments (4) 1 1 1 1
Other income 21 46 37 40 43
Management expenses
EBITDA 196 222 315 401 480
Depreciation and amortisation (9) (9) (8) (8) (8)
EBIT 187 213 307 393 472
Net interest expense (7) (8) (1) 0 5
Associates & JCEs 164 176 214 247 273
Other income
Earnings before tax 344 381 520 640 750 Associates earnings are
Income tax (59) (123) (99) (121) (140) mainly driven by sales at
Net profit after tax 285 258 421 519 610 Reflections at Keppel Bay and
Minority interests (19) (15) (31) (39) (47) Marina Bay Suites in
Other items Singapore, as well as
Preferred dividends Botanica and Central Park
Normalised NPAT 266 244 390 480 563 City in China
Extraordinary items 14 802 - - -
Reported NPAT 280 1,046 390 480 563
Dividends (11) (44) (131) (131) (131)
Transfer to reserves 269 1,001 259 349 432

Reported P/E (x) 18.4 6.1 16.5 13.4 11.5
Dividend yield (%) 1.8 4.0 2.0 2.0 2.0
Price/cashflow (x) 10.0 na 26.6 16.7 14.6
Price/book (x) 1.9 1.5 1.4 1.3 1.2
EV/EBITDA (x) 20.1 18.4 13.8 11.0 9.1
EV/EBIT (x) 20.6 18.8 14.0 11.1 9.2
EBIT margin (%) 20.2 26.9 27.4 27.1 27.0
Effective tax rate (%) 17.2 32.2 19.1 18.9 18.7
Dividend payout (%) 4.0 4.2 33.5 27.2 23.2
ROA (pretax %) 6.3 6.3 7.4 8.3 8.8
Growth (%)
Revenue 9.7 (14.2) 41.4 29.5 20.7
EBITDA (5.0) 13.3 42.0 27.3 19.6
EBIT (6.0) 14.2 44.1 28.1 20.0
Normalised EPS (7.6) (26.2) 58.6 23.1 17.2
Normalised FDEPS (7.4) (26.3) 58.2 23.1 17.2
Per share
Reported EPS (S$) 0.24 0.73 0.27 0.33 0.39
Norm EPS (S$) 0.23 0.17 0.27 0.33 0.39
Book value per share (S$) 2.36 2.97 3.14 3.39 3.68
DPS (S$) 0.08 0.18 0.09 0.09 0.09

Keppel Land Min Chow Sai
Cashflow (S$mn)
EBITDA 196 222 315 401 480
Change in working capital 289 (1,122) (106) (53) (71)
Other operating cashflow 28 (258) 34 38 34
Cashflow from operations 513 (1,158) 243 387 443
Capital expenditure (63) 12 (8) (8) (8)
Free cashflow 450 (1,146) 235 379 435
Reduction in investments
Net acquisitions (319) 644 (71) (75) (78)
Reduction in other LT assets
Addition in other LT liabilities
Adjustments 35 30 50 51 56
Cashflow after investing acts 165 (472) 213 355 413
Cash dividends (11) (44) (131) (131) (131)
Equity issue 701 3 - - -
Debt issue (395) 790 4 - - Include investments in the
Convertible debt issue development of MBFC
Others (161) 437 (50) (50) (50) Phases I& II and OFC
Cashflow from financial acts 134 1,185 (177) (181) (181)
Net cashflow 299 714 36 174 232
Beginning cash 640 938 1,652 1,688 1,862
Ending cash 938 1,652 1,688 1,862 2,094
Ending net debt 789 865 832 658 426
Balance sheet (S$mn)

Cash & equivalents 938 1,652 1,688 1,862 2,094
Properties held for sale 1,245 2,201 2,505 2,756 3,007
Accounts receivable 295 587 829 1,074 1,296
Other current assets
Total current assets 2,478 4,440 5,022 5,692 6,397
Investment properties 2,414 2,257 2,370 2,489 2,613
Other fixed assets (net) 228 207 207 207 207
Associates 1,432 1,420 1,491 1,565 1,644
Other LT assets - - - - -
Total assets 6,552 8,323 9,090 9,953 10,860
Short-term debt 823 317 320 320 320
Accounts payable 715 894 1,264 1,637 1,975
Other current liabilities 223 170 240 311 375
Total current liabilities 1,761 1,381 1,824 2,267 2,670
Long-term debt 904 2,200 2,200 2,200 2,200
Convertible debt
Other LT liabilities 99 103 145 188 227
Minority interest 413 339 360 387 421
Preferred stock
Shareholders' Equity 3,376 4,301 4,561 4,910 5,342
Other equity and reserves
Total shareholders' equity 3,376 4,301 4,561 4,910 5,342
Total equity & liabilities 6,552 8,323 9,090 9,953 10,860
Leverage
Interest cover 27.9 25.1 363.9 na na
Gross debt/property assets (%) 26.4 30.2 27.7 25.3 23.2
Net debt/EBITDA (x) 4.02 3.89 2.64 1.64 0.89
Net debt/equity (%) 23.4 20.1 18.2 13.4 8.0
Dupont decomposition
Net margin (%) 30.4 132.0 34.8 33.1 32.1
Asset utilisation (x) 0.1 0.1 0.1 0.1 0.2
ROA (%) 4.3 12.6 4.3 4.8 5.2
Leverage (Assets/Equity x) 1.7 1.8 1.8 1.9 1.9
ROE (%) 7.4 22.5 7.9 9.1 9.8

CapitaCommercial Trust C C T S P
P R O P E R TY | S I N G AP O R E Maintained
Min Chow Sai +65 6433 6959 minchow.sai@nomura.com

BUY
CCT’s recent 4Q10 results confirmed that the REIT’s core portfolio continues to Price target S$1.81
(set on 1 Feb 11)
perform ahead of our expectations, underpinned by firm occupancy. While
acquisition opportunities in the IGA office market may prove elusive, we see unit Difference from consensus 15.2%
price performance driven by higher office capital values underpinning our
expectations of further revaluations of CCT’s book value during 2011. BUY. FY12F net profit (S$mn) 213.9
With yields in the physical office market at 3.5-4.0%, valuations remain attractive
prompting further capital inflows, higher asset prices and higher REIT book values. Nomura vs consensus
Anchor themes We believe the market continues to
A faster-than-expected pick-up in rents and capital values has been supported by a focus on relative yields rather than
squeeze in “reported” vacancy. Stronger demand, coupled with anticipated stock the underlying asset value of CCT’s
demolitions, will likely see lower-than-expected peak vacancy underpinning the portfolio and the potential for asset
current momentum in rental growth. revaluations.
Asset play II Key financials & valuations

Revenue 391.9 364.2 374.7 386.4
 4Q10: core portfolio performing as expected Income for dis tribution 529 201 214 223
Normalised dis t income 221 201 214 223
CCT’s FY10 results released 19 January 2010 highlighted that the Normalised DPU (S$) 0.078 0.071 0.075 0.078
office portfolio continued to perform marginally ahead of our Norm. DPU growt h (% ) 10.9 (9.1) 6.0 4.1
Norm. P/E (x) 17.9 19.7 18.5 17.8
expectations, with net property income boosted by lower operating BVPU (S$) 1.51 1.51 1. 50 1.49
expenses. Underpinning gross income in FY10, notwithstanding Price/ book (x) 0.9 0.9 0.9 0.9
negative reversions in Six Battery Rd (revenues in 4Q10 were DPU yield (% ) 5.6 5.1 5.4 5.6
ROE (%) 1.5 1.4 1.4 1.4
S$17.5mn vs S$21.4mn in 3Q10), was income resilience from Capital
Gearing (%) 2.9 4.0 4.4 4.6
Tower and One George St due to the nature of the underlying lease Earnings r evisions
structures/rental guarantees and higher occupancy. Portfolio Previous norm. net profit 201.3 213.9 223.1
occupancy in 4Q10 rose to 99.3% (vs 98.2% in 3Q10) on the back of Change from previous (% ) - - -
Previous norm. DPU (S$) 0.071 0.075 0.078
strong occupancy in Wilkies Edge. CCT’s flagship buildings of Six
Battery Rd, Capital Tower and One George Street saw occupancy
remain broadly unchanged during 4Q10 at circa 100%. Share price relative to MSCISG
 Rental uplift to cushion negative reversions 1.6 140
1.5 130
With office rents up 19.9% y-y in 2010 the expected 2011 negative 1.4
120
office rental reversions have, in part, been mitigated. Given strong 1.3
110
demand, rising pre-commitment and a marginally a lower forecast 1.2
1.1 100
peak CBD office vacancy in 2011, we look for IGA/Grade A office
1.0 90
space to rise by 7.5-10.0% in 2011F and 5.0% in 2012F.
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct 10
 Reiterate BUY with PT of S$1.81. 1m 3m 6m

Absolute (S$) (2.1) (6.0) (5.4)
We maintain BUY with PT of S$1.81 (based on DCF, discount rate: Absolute (US$) (1.4) (3.9) (1.5)
7~7.5%, terminal yield: 4~7.25% for various assets). We see value in Relative to Index (3.8) (1.4) (4.9)
the CCT portfolio in the context of the physical market with CCT’s Mark et cap (U S$mn) 3,134
Estimated free float (% ) 0.0
enterprise value suggesting that its office portfolio is trading at circa 52-week range (S$) 1.56/ 1.07
S$1,752/psf — attractive given recent transactions in the physical 3-mth avg daily turnover (US$mn) 8.20
market. Risks to our investment view: an unexpected decline in Stock borrowability Easy
economic activity or office demand could affect our rental and
CapitaLand 30.5
occupancy expectations, which could adversely impact our DPU Capital 8.2
estimates. Sou rce: Comp any, Nom ura estim ates

CapitaCommercial Trust Min Chow Sai
Rental income 403 392 364 375 386
Other Revenue
Revenue 403 392 364 375 386
Land rent & property tax (38) (32) (35) (36) (37)
Property management fees (11) (11) (11) (11) (11)
Other operating expenses (54) (50) (50) (51) (52)
Management expenses (20) (19) (20) (20) (20)
Trust expenses (1) (2) (2) (2) (2)
Other operating expenses
EBITDA 281 283 251 260 269
Depreciation (3) (6) (6) (6) (6) Decline in revenue reflects
Amortisation of intangible assets 2010 asset disposals
EBIT 278 278 245 254 263
Net property income 300 299 269 277 287
Net interest expense (86) (94) (61) (57) (58)
Associates & JCEs 4 7 7 7 8
Other income
Earnings before tax 196 190 191 204 213
Income tax 0 0 0 0 0
Net profit after tax 196 190 191 204 213
Minority interests
Other & non tax deductible items 3 31 10 10 10
Preferred dividends
Normalised income for distn 199 221 201 214 223
Extraordinary items (1,035) 308 - - -
Income for distribution (836) 529 201 214 223

Reported P/E (x) na 7.5 19.7 18.5 17.8
Dividend yield (%) 5.0 5.6 5.1 5.4 5.6
Price/book (x) 1.0 0.9 0.9 0.9 0.9
EV/EBITDA (x) 19.9 17.5 19.8 19.3 18.8
EV/EBIT (x) 20.1 17.9 20.3 19.7 19.2
EBIT margin (%) 69.0 70.9 67.2 67.8 68.1
Effective tax rate (%) (0.0) (0.0) (0.0) (0.0) (0.0)
ROA (pretax %) 4.5 5.0 4.5 4.7 4.8
Growth (%)
Revenue 20.3 (2.8) (7.1) 2.9 3.1
EBITDA 38.2 1.0 (11.6) 3.7 3.5
EBIT 37.5 (0.2) (11.8) 3.7 3.6
Normalised EPU 29.7 (45.2) (9.2) 6.0 4.1
Normalised FDEPU 29.7 (45.2) (9.2) 6.0 4.1
DPU (35.6) 10.9 (9.1) 6.0 4.1
Per unit
Reported EPU (S$) (0.60) 0.19 0.07 0.08 0.08
Norm EPU (S$) 0.14 0.08 0.07 0.08 0.08
Fully diluted norm EPU (S$) 0.14 0.08 0.07 0.08 0.08
Book value per unit (S$) 1.41 1.51 1.51 1.50 1.49
DPU (S$) 0.07 0.08 0.07 0.08 0.08

CapitaCommercial Trust Min Chow Sai
Cashflow (S$mn)
EBITDA 281 283 251 260 269
Change in working capital (182) 224 (9) 3 4
Other operating cashflow 96 (276) (35) (56) (57)
Cashflow from operations 195 231 206 207 215
Capital expenditure (27) (30) (20) (36) (34)
Free cashflow 168 201 186 171 181
Acquisition of investment properties - - - - -
Net acquisitions (2) 579 - - -
Reduction in other LT assets - - - - -
Addition in other LT liabilities (2) (2) 24 (1) (1)
Adjustments (8) 15 (24) 1 1
Cashflow after investing acts 156 793 186 171 181
Cash dividends (175) (215) (201) (214) (223)
Equity issue 828 - - - -
Debt issue (577) (115) (200) 175 -
Convertible debt issue 13 (140) - (183) -
Others (0) - 0 (0) 0
Cashflow from financial acts 89 (470) (401) (222) (223)
Net cashflow 246 323 (215) (51) (42)
Beginning cash 67 312 636 420 369
Ending cash 312 636 420 369 328
Ending net debt 1,711 1,133 1,148 1,191 1,233

Cash & equivalents 312 636 420 369 328
Accounts receivable 9 6 6 6 6
Other current assets 195 11 11 11 11
Total current assets 516 653 437 386 345
Investment properties 6,359 5,550 5,476 5,496 5,532
Acquisitions - (267) - - -
Capital expenditure 1 1 20 36 34
Net appreciation in value (839) 193 - - -
Associates 63 67 67 67 67
Other LT assets
Total assets 6,100 6,196 6,001 5,986 5,978
Short-term debt 235 859 859 834 834
Accounts payable 71 103 95 98 101
Total current liabilities 326 986 977 956 959
Long-term debt 1,425 686 486 686 686
Convertible debt 363 224 224 40 40
Minority interest
Preferred stock
Common stock 3,956 4,274 4,274 4,274 4,274
Retained earnings
Proposed dividends
Other equity and reserves - - (10) (20) (30)
Non convertible prefs
Total unitholders' funds 3,956 4,274 4,264 4,254 4,243
Total units' funds & liabilities 6,100 6,196 6,001 5,986 5,978
Leverage
Interest cover 3.2 2.9 4.0 4.4 4.6
Gross debt/property assets (%) 36.2 31.9 28.2 27.9 27.7
Net debt/EBITDA (x) 6.1 4.0 4.6 4.6 4.6
Net debt/equity (%) 43.2 26.5 26.9 28.0 29.0
Dupont decomposition
Net margin (%) (207.37) 134.90 55.26 57.09 57.74
Asset utilisation (x) 0.1 0.1 0.1 0.1 0.1
ROA (%) (12.9) 8.6 3.3 3.6 3.7
Leverage (Assets/Equity x) 1.6 1.5 1.4 1.4 1.4
ROE (%) (20.6) 12. 8 4. 7 5.0 5.2

Golden Agri-Resources G G R S P
C O N S U M E R R E L AT E D / AG R I - R E L AT E D | S I N G AP O R E Maintained
NOMURA SECURITIES MALAYSIA SDN. BHD
Ken Arieff Wong +60 3 2027 6895 kenarieff.wong@nomura.com

Tushar Mohata (Associate) BUY
Golden Agri has corrected 13.1% over the past three months (vs STI down 4.4%), Price target S$0.90
in line with the correction in CPO prices. However, we think this fall is overdone, as (set on 9 Feb 11)
our calculations suggest significant upside (26%) even at a more conservative CPO Upside/downside 28.8%
price assumption of RM3,000/mT for FY11F (vs our current assumption of Difference from consensus 9.2%
RM3,400/mT). GGR is the most liquid proxy to CPO prices regionally and is one of
FY11F net profit (US$mn) 530
the key stocks to ride this upcycle, in our view. Further, it has been proactive in its Difference from consensus 11.9%
sustainability plans of late, which we view positively. Maintain BUY. Source: Nomura
 Catalysts
Continued strong prices from global agri-commodities should sustain higher prices Nomura vs consensus
for CPO and lead to a further re-rating for plantation companies. We are more bullish in our FY11-12F
forecasts for CPO prices, which
Anchor themes
translates into higher earnings
Continued tight global vegetable oils outlook, a stronger crude oil price, weaker US forecasts for the plantation
dollar (relative to Asian currencies), and bullish outlook for global agri-commodities companies under our coverage.
(including non-oil crops) should sustain higher CPO prices and drive earnings.

Too harshly punished 31 Dec (US$mn)
Revenue
FY09 FY10F FY11F FY12F
2,294 2,920 3,733 4,018
Reported net profit 203 358 530 588
 26% upside even at CPO price of RM3,000/t - compelling Normalised net profit 203 358 530 588
Normalised EPS (US$) 0.018 0.031 0.046 0.051
Golden Agri has corrected 13.1% over the past three months (vs STI Norm. EPS growth (%) (43.5) 76.7 48.0 10.9
down 4.4%), in line with the correction in CPO prices. However, we Norm. P/E (x) 31.1 17.6 11.9 10.7
think this correction is overdone, because even if we build in a lower EV/EBITDA (x) 18.0 11.1 8.0 7.1
Price/book (x) 1.2 1.1 1.0 0.9
CPO price assumption of RM3,000/mT for FY11F (vs our current Dividend yield (%) 0.9 1.1 1.7 1.9
assumption of RM3,400/mT and YTD 2011 average of RM3,673/mT), ROE (%) 4.0 6.3 8.4 8.4
there is still ~26% upside to the current share price, based on our Net debt/equity (%) 7.3 6.3 5.1 2.4
Earnings revisions
calculations. We value the company at 16x FY11F P/E (rolling-
Previous norm. net profit 358 530 588
forward), a valuation of +0.8x SD above its mean, which we think is Change from previous (%) - - -
reasonable on our bullish CPO view. Previous norm. EPS (US$) 0.031 0.046 0.051
Source: Company, Nomura estimates
 More proactive in managing sustainability issues Share price relative to MSCISG

2010 was a difficult year for GGR with regard to its public relations,
(S$) Pric e Rel MSCISG
given the battles waged against the group by environmentalists. We 0.90 130
think 2011 will be very different, however, since we believe GGR’s 0.80 120
clashes with environmentalists may have peaked with the RSPO’s 0.70 110
public reprimand late last year. In our view, GGR has been more 0.60 100
proactive in its sustainability plans, with provisional RSPO 0.50 90
membership and targets for certification by December 2015, and even 0.40 80
Mar10
Apr10
May10
Jun10
Aug10
Sep10
Oct10
Nov10
Dec10
Jan11
Feb11
Jul10
jointly sharing plans for forest conservation and sustainable palm oil
with the Forest Trust this month, which we see as positive for 1m 3m 6m
sentiment. Absolute (S$) 1.5 (13.1) 21.9
Absolute (US$) 2.2 (11.2) 26.9
Relative to Index (0.2) (8.7) 23.5
 Most liquid CPO play, highest CPO leverage; strong Market cap (US$mn) 6,682
increase in hectarage Estimated free float (%) 51.4
52-week range (S$) 0.82/0.48
GGR is the most liquid upstream CPO play in the region, with the
highest correlation to CPO prices (0.93x) among our covered stocks. Stock borrowability Easy
It offers a healthy mature hectarage growth of 6-8% pa. It intends to Major shareholders (%)
increase its hectarage by 20-30,000ha pa through organic and Flambo International 48.6
inorganic routes, which we think may be somewhat aggressive owing Source: Company, Nomura estimates
to environmental issues, but would still be among the highest in the
region.

Golden Agri-Resources Ken Arieff Wong
Valuation methodology. We value the company at 16x FY11F P/E. We believe this
mid-cycle valuation of +0.8x SD above the stock’s mean is reasonable in the context of
our bullish CPO view. Our PT is S$0.90.
Risks to our investment view. Downside risks include lower-than-expected

production, a sharp fall in CPO prices, or any further environmental pushbacks against
the group.

Income statement (US$mn)
Revenue 2,986 2,294 2,920 3,733 4,018
Low ROE mainly due to
Cost of goods sold (2,110) (1,784) (2,073) (2,613) (2,812) mandatory asset revaluations
Gross profit 876 509 847 1,120 1,205 pushing up book value
SG&A (347) (195) (307) (346) (355)
Employee share expense
Operating profit 529 315 540 774 850
EBITDA 587 383 625 869 954

Depreciation (58) (68) (85) (95) (104)
Amortisation
EBIT 529 315 540 774 850
Other income 5 13 - - -
Income tax (120) (88) (121) (179) (199)
Other items
Preferred dividends
Normalised NPAT 377 203 358 530 588
Extraordinary items
Reported NPAT 377 203 358 530 588
Dividends (97) (57) (72) (106) (118)
Transfer to reserves 280 145 286 424 470

Reported P/E (x) 17.6 31.1 17.6 11.9 10.7
Dividend yield (%) 1.5 0.9 1.1 1.7 1.9
Price/cashflow (x) 15.5 18.2 12.5 11.2 9.7
Price/book (x) 1.4 1.2 1.1 1.0 0.9
EV/EBITDA (x) 11.9 18.0 11.1 8.0 7.1
EV/EBIT (x) 13.2 21.8 12.8 8.9 7.9
Gross margin (%) 29.3 22.2 29.0 30.0 30.0
EBITDA margin (%) 19.7 16.7 21.4 23.3 23.8
EBIT margin (%) 17.7 13.7 18.5 20.7 21.2
Net margin (%) 12.6 8.8 12.3 14.2 14.6
Dividend payout (%) 25.8 28.2 20.0 20.0 20.0
Capex to sales (%) 8.2 11.2 10.9 8.5 7.9
Capex to depreciation (x) 4.2 3.8 3.7 3.3 3.0
ROE (%) 9.5 4.0 6.3 8.4 8.4
ROA (pretax %) 9.2 4.5 6.9 9.2 9.4
Growth (%)
Revenue 59.4 (23.2) 27.3 27.8 7.6
EBITDA 12.3 (34.8) 63.3 38.9 9.8
EBIT 11.7 (40.5) 71.6 43.3 9.8
Normalised EPS 31.9 (43.5) 76.7 48.0 10.9
Normalised FDEPS 31.9 (43.5) 76.7 48.0 10.9
Per share
Reported EPS (US$) 0.03 0.02 0.03 0.05 0.05
Norm EPS (US$) 0.03 0.02 0.03 0.05 0.05
Fully diluted norm EPS (US$) 0.03 0.02 0.03 0.05 0.05
Book value per share (US$) 0.38 0.47 0.52 0.57 0.64
DPS (US$) 0.01 0.00 0.01 0.01 0.01

Cashflow (US$mn)
EBITDA 587 383 625 869 954
Change in working capital 31 (11) 23 (97) (34)
Other operating cashflow (191) (25) (146) (207) (269)
Free cashflow 183 91 186 248 334
Reduction in investments (36) (36) 77 - (1)
Net acquisitions (502) (135) (129) (151) (151)
Addition in other LT liabilities 441 (53) (136) (69) (53)
Adjustments - - 91 119 148
Cashflow after investing acts 86 (133) 89 147 277
Cash dividends (92) (57) (72) (106) (118)
Equity issue - 215 - - -
Debt issue 17 129 217 50 -
Convertible debt issue
Others (2) - - - -
Cashflow from financial acts (78) 287 145 (56) (118)
Net cashflow 9 154 235 91 160
Beginning cash 124 133 288 522 613
Ending cash 133 288 522 613 773
Ending net debt 421 396 378 337 177
Balance sheet (US$mn)

Marketable securities 5 66 30 30 31
Inventories 248 420 399 510 549
Other current assets - - - - -
Total current assets 707 1,106 1,374 1,694 1,935 Growing cash balances could
LT investments 216 191 150 150 150 mean higher dividend payout
Fixed assets 5,766 6,460 6,966 7,481 8,008 ratio if the group is not able to
Goodwill 116 116 110 105 99 make sizeable capex
Other intangible assets 20 28 28 28 28 additions
Other LT assets - - - - -
Total assets 6,825 7,900 8,628 9,458 10,220
Short-term debt 310 314 500 500 500
Total current liabilities 548 724 1,003 1,135 1,181
Long-term debt 244 369 400 450 450
Convertible debt - - - - -
Other LT liabilities 1,326 1,273 1,138 1,069 1,016
Preferred stock - - - - -
Common stock 249 303 303 303 303
Other equity and reserves 955 1,120 1,120 1,120 1,120
Liquidity (x)
Current ratio 1.29 1.53 1.37 1.49 1.64
Interest cover 14.9 7.6 9.1 12.2 13.7
Leverage
Net debt/EBITDA (x) 0.72 1.03 0.60 0.39 0.19
Net debt/equity (%) 9.1 7.3 6.3 5.1 2.4
Activity (days)
Days receivable 38.9 52.0 47.2 47.1 51.1
Days inventory 48.5 68.3 72.1 63.5 68.9
Days payable 37.5 59.0 74.4 75.3 81.8
Cash cycle 50.0 61.3 44.9 35.3 38.3

Noble Group N O B L S P Maintained

B AS I C M AT E R I AL S | S I N G AP O R E NOMURA SINGAPORE LIMITED
Tanuj Shori +65 6433 6981 tanuj.shori@nomura.com


Noble is down 2% YTD due to sector headwinds (commodity price correction) and Price target S$2.80
(set on 1 Mar 11)
the recent ~5% dilution. However, we believe the stock’s stagnant performance
belies strong 4Q10 results and management’s bullish FY11F outlook. The stock
looks attractive at ~14.4x FY11F P/E. Noble is directionally long on sugar and
coking coal, and the current price environment of these commodities should flow to FY12F net profit (US$mn) 845
the bottom line, in our view. We also think the potential listing of other players such Difference from consensus 0.0%
as Glencore should help the stock re-rate. Maintaining BUY. Source: Nomura
 Catalysts Nomura vs consensus

Enhanced volumes/margins on maturing pipeline; growth opportunities through its Our higher-than-consensus PT
association with CIC; asset acquisitions; potential coal asset restructuring. reflects the impact of recent deals
(Berau Coal stake and Cerradinho
Anchor themes
acquisition); we think Noble deserves
Commodity price volatility implies balance sheet strength and this merits a premium. a higher multiple in the current strong
Also, strong demand prompts a favourable stance toward stocks leveraged to recovery. macro environment.
Poised for a strong FY11F Key financials & valuations

31 Dec (US$mn) FY10 FY11F FY12F FY13F
Revenue 56,696 73,536 87,363 102,517
 Stock down YTD in spite of strong 4Q10 Reported net profit 606 732 845 960
Normalised net profit 527 732 845 960
Noble is down 2% YTD due to sector headwinds (commodity price Normalised EPS (US$) 0.088 0.122 0.141 0.160
correction) and ~5% dilution announced in March. However, we believe Norm. EPS growth (%) 4.8 38.9 15.4 13.7
the stock’s stagnant performance belies strong 4Q10 results and Norm. P/E (x) 19.9 14.4 12.4 10.9
EV/EBITDA (x) 14.2 10.3 9.5 8.7
management’s bullish FY11F outlook. Even after the impact of dilution, Price/book (x) 2.5 2.2 1.9 1.7
there will just be a ~4% impact to our PT, which still leaves much Dividend yield (%) 1.3 1.5 2.1 2.5
room for upside, in our view. ROE (%) 17.5 17.2 17.4 17.4
Net debt/equity (%) 113.7 113.3 111.6 108.4
 Outlook remains strong on Agri and Energy Earnings revisions
As per Noble, 2010 was the year of expenses to build long-term Change from previous (%) - - -
assets, and the steady-state contribution of these new assets is still a Previous norm. EPS (US$) 0.122 0.141 0.160
few quarters away, implying continued strong earnings growth. It
expects Agri to do well on volumes/strong margins, while Energy’s Share price relative to MSCISG
performance should pick up as 4Q was impacted by provisions in
(S$) Pric e Rel MSCISG
carbon credits. It reaffirmed its commitment of targeting 20% RoE on 2.4 110
105
new investments and reaching an earnings base of US$1bn by 2013F. 2.2 100
2.0 95
 Balance sheet priority – to maintain investment grade 1.8
90
85
1.6 80
Noble’s balance sheet continues to look good with ~70%+ debt long 75
term and an adj cash cycle of ~12 days. Though net gearing is ~100%, 1.4 70
May10
Sep10
Apr10
Jun10
Aug10
Oct10
Nov10
Dec10
Jan11
Mar10
Jul10
Feb11
it is still sitting on ~US$1.6bn in cash as per the latest results, which

would rise further on the recent equity raising of ~US$488mn. This will 1m 3m 6m
also help Noble in retaining investment grade ratings due to improved Absolute (S$) (2.3) (1.4) 13.2
Absolute (US$) (1.6) 0.8 17.8
debt ratios.
Relative to Index (4.0) 3.3 14.4
Market cap (US$mn) 10,748
 We believe momentum will continue; re-affirm BUY Estimated free float (%) 51.6
The stock looks attractive at ~14.4x FY11F P/E (implied FY11F 52-week range (S$) 2.34/1.56
earnings growth of ~40% achievable as new assets such as Sempra Stock borrowability Easy
and Brazilian sugar will contribute). Noble is directionally long on Major shareholders (%)
sugar and coking coal, and the current price environment of these Noble Temple Trading 24.2
China Investment Corp 14.8
commodities should flow to the bottom line, in our view. Plus, we think
the potential listing of other supply chain players such as Glencore
should help the stock re-rate.

Noble Group Tanuj Shori
Valuation: We value Noble using a residual dividend model, with an 8.75% cost of
equity, 2.5% terminal growth rate and long-term ROE of 12%. Our price target is
S$2.80.
Risks to our call: The key company-specific risk in our view would be execution of its
targeted processing facilities to generate more trading volumes. For example, it is
targeting ~3mn MT of crushing capacity in Argentina (which would imply roughly 8% of
Argentina’s crushing market) — the key risk in our view here would be tapping demand
for these additional volumes of soy meal and soy oil. China currently satisfies most of
its soy meal and soy oil requirements from soybeans crushed domestically, and thus,
exporting crushed soy meal from Argentina to Europe or China is prone to demand
risks. Similarly, the sugar industry in Brazil is burdened by various regulations, and
competition is heating up with global giants such as Bunge entering the market.
Sustaining volumes with good profitability will remain a challenge, in our view.
Noble is the most leveraged name to the commodity cycle in our universe. If
commodity prices correct, the company’s earnings potential will be negatively impacted.
To add, working capital may be a concern with rising commodity prices.
On the funding side, interest costs can be a swing factor because of high leverage.

Revenue 31,183 56,696 73,536 87,363 102,517
Cost of goods sold (30,078) (55,064) (71,475) (85,027) (99,866)
Gross profit 1,105 1,632 2,061 2,337 2,651
SG&A (402) (692) (783) (888) (1,008)
Operating profit 703 940 1,278 1,449 1,644
EBITDA 840 1,076 1,534 1,737 1,971

Depreciation (116) (118) (217) (247) (240)
Amortisation (22) (18) (39) (41) (87)
EBIT 703 940 1,278 1,449 1,644
Associates & JCEs (25) (6) - - -
Other income 105 95 - - -
Earnings before tax 620 723 874 1,008 1,146
Income tax (65) (116) (140) (162) (184)
Minority interests 1 (1) (2) (2) (2)
Other items (116) (78) - - -
Preferred dividends
Extraordinary items 116 78 - - -
Reported NPAT 556 606 732 845 960
Dividends (108) (130) (155) (216) (249)

FD normalised P/E at price target (x) 25.2 26.1 18.8 16.3 14.3 On track to achieve solid
Reported P/E (x) 14.9 16.7 13.8 11.9 10.5 earnings growth
Dividend yield (%) 1.3 1.3 1.5 2.1 2.5
Price/cashflow (x) na na 19.8 15.5 13.6
Price/book (x) 3.0 2.5 2.2 1.9 1.7
EV/EBITDA (x) 15.3 14.2 10.3 9.5 8.7
EV/EBIT (x) 18.3 16.3 12.4 11.4 10.4
Gross margin (%) 3.5 2.9 2.8 2.7 2.6
EBITDA margin (%) 2.7 1.9 2.1 2.0 1.9
EBIT margin (%) 2.3 1.7 1.7 1.7 1.6
Net margin (%) 1.8 1.1 1.0 1.0 0.9
Dividend payout (%) 19.4 21.4 21.2 25.5 25.9
Capex to sales (%) 2.4 1.1 0.7 0.6 0.5
ROE (%) 23.1 17.5 17.2 17.4 17.4
ROA (pretax %) 8.2 7.3 7.7 7.8 7.8
Growth (%)
Revenue (13.6) 81.8 29.7 18.8 17.3
EBITDA (5.4) 28.1 42.5 13.3 13.4
EBIT (9.9) 33.8 35.8 13.4 13.5
Normalised EPS (19.5) 4.8 38.9 15.4 13.7
Per share
Reported EPS (US$) 0.11 0.10 0.12 0.14 0.16
Norm EPS (US$) 0.08 0.09 0.12 0.14 0.16
DPS (US$) 0.02 0.02 0.03 0.04 0.04

Cashflow (US$mn)
EBITDA 840 1,076 1,534 1,737 1,971
Change in working capital (2,044) (914) (1,004) (1,042) (1,150)
Other operating cashflow 394 (1,506) (20) (43) (79)
Cashflow from operations (810) (1,343) 510 652 742
Free cashflow (1,562) (1,995) (36) 150 245
Reduction in investments 39 (400) - - -
Net acquisitions (267) - - - -
Reduction in other LT assets (8) (674) (0) 0 (0)
Addition in other LT liabilities 3 428 (0) (0) 0
Adjustments (151) 62 (495) (26) (26)
Cashflow after investing acts (1,947) (2,579) (531) 124 218
Cash dividends (108) (130) (155) (216) (249)
Debt issue 928 2,517 1,150 301 800
Convertible debt issue - - - - -
Others 9 136 (498) (533) (576)
Cashflow from financial acts 1,566 3,247 497 (447) (24)
Net cashflow (381) 668 (35) (324) 194
Beginning cash 1,318 937 1,606 1,571 1,247
Ending cash 937 1,606 1,571 1,247 1,441
Ending net debt 2,604 4,519 5,154 5,779 6,385

Cash & equivalents 937 1,606 1,571 1,247 1,441
Marketable securities
Accounts receivable 1,141 2,061 2,418 2,872 3,370
Inventories 3,415 3,968 4,504 5,358 6,293
Other current assets 3,016 4,734 5,241 6,235 7,323
Total current assets 8,508 12,369 13,734 15,712 18,427 Gearing to remain stable
LT investments 90 489 489 489 489
Fixed assets 1,726 3,156 3,366 3,580 3,750
Goodwill 35 35 35 35 35
Other intangible assets 6 324 324 324 324
Other LT assets 290 964 964 964 964
Total assets 10,655 17,338 18,913 21,105 23,990
Short-term debt 609 1,528 1,533 1,527 1,727
Accounts payable 3,866 6,105 6,462 7,687 9,029
Long-term debt 2,652 4,285 5,192 5,500 6,100
Convertible debt 280 311 0 0 -
Preferred stock
Common stock 1,321 1,406 1,406 1,406 1,406
Proposed dividends
Other equity and reserves (174) 298 298 298 298
Liquidity (x)
Current ratio 1.87 1.60 1.69 1.67 1.68
Interest cover 4.3 3.1 3.2 3.3 3.3
Leverage
Net debt/EBITDA (x) 3.10 4.20 3.36 3.33 3.24
Net debt/equity (%) 88.1 113.7 113.3 111.6 108.4
Activity (days)
Days receivable 12.1 10.3 11.1 11.1 11.1
Days inventory 31.4 24.5 21.6 21.2 21.3
Days payable 44.7 33.0 32.1 30.5 30.5
Cash cycle (1.2) 1.7 0.7 1.9 1.9

Mewah International M I I S P
C O N S U M E R R E L AT E D / AG R I - R E L AT E D | S I N G AP O R E Maintained
Tanuj Shori +65 6433 6981 tanuj.shori@nomura.com

Mewah has corrected 17.5% after rebounding 30% post a disappointing IPO, and Price target S$1.34
(set on 25 Feb 11)
now trades at a 25% discount to Singapore-listed peers. It is a strong consumer
pack oil franchise with majority market share in W Africa, and offers stable margin Difference from consensus 0.8%
exposure on the refining side. Its business mix is changing toward the high-margin
branded business, and greater access to capital markets post listing should unlock FY12F net profit (US$mn) 127.3
a new wave of asset and capex investments. We believe valuations will re-rate on Difference from consensus 3.0%
Source: Nomura
sustainable earnings growth and growing information flow going forward. BUY.
 Catalysts
Nomura vs consensus
Any new capex/asset investments across the value chain, change in mix towards
We are broadly in line with
high-value consumer pack business.
consensus. We think the earnings
Anchor themes trajectory will rise once new projects
Africa is fast becoming popular for exposure to Agri commodities, and players come on line post FY11F.
having a significant presence should be able to better capture the opportunities.
Attractive after the correction Key financials & valuations

Revenue 3,533 4,086 4,767 5,443
 Trading at an attractive discount to peers Reported net profit 92.4 108.6 127.3 143.1
Normalised net profit 97.1 108.6 127.3 143.1
Mewah has corrected 17.5% (vs 4.7% decline in STI) after having Normalised EPS (US$) 0.074 0.072 0.084 0.095
rebounded 30% post a disappointing IPO, without any negative Norm. EPS growth (%) 6.9 (3.2) 17.3 12.4
catalysts. We see valuations as attractive at ~10.5x FY11F P/E vs Norm. P/E (x) 10.1 10.5 8.9 7.9
EV/EBITDA (x) 9.8 8.4 7.0 6.1
Wilmar’s ~18.5x and Ruchi Soya’s ~12.4x. We believe greater access Price/book (x) 1.9 1.8 1.5 1.3
to capital markets, now that it is listed, and growing information flow Dividend yield (%) 2.2 0.0 0.0 0.0
should help re-rate the stock. ROE (%) 24.8 19.3 18.7 17.6
Net debt/equity (%) 21.8 26.5 23.1 16.1
 Reiterate BUY: growing margins, balance sheet, Africa Earnings revisions

Previous norm. net profit 108.6 127.3 143.1
As we see it, the key drivers are Mewah’s exposure to African Change from previous (%) - - -
distribution markets, growing high-margin consumer pack business, Previous norm. EPS (US$) 0.072 0.084 0.095
integrated operations with a stable refining margin profile, and strong
balance sheet. On reasonable valuations, potential for re-rating given a Share price relative to MSCISG
strong franchise in Africa, and possible capex/M&A, we reiterate BUY.
1.3 130.000
 Near-term earnings growth may look muted 1.2 110.000
90.000
Near-term earnings growth may look muted and will likely depend on 1.1 70.000
margin expansion; we believe organic growth in volume will mostly 1.0 50.000
30.000
come as new projects come on line by end-FY11/early-FY12. Overall, 0.9
10.000
we forecast a core earnings CAGR of ~14% for FY10-13F, driven 0.8 -10.000
Nov10
Jan11
Mar11
equally by volume and margin growth. On the upside, Mewah may

use its strong balance sheet to fund new asset investments. 1m 3m 6m
Absolute (S$) (4.9) (6.7) na
 Exposure to African markets: long-term driver Absolute (US$) (4.2) (4.6) na
Relative to Index (6.6) (2.1) na
Some 40% of Mewah’s consumer pack earnings come from Africa; it Market cap (US$mn) 1,170
is a leader in West Africa, where it aims to accelerate expansion. We Estimated free float (%) 17.0
see this as a long-term positive, since it can leverage its distribution 52-week range (S$) 1.20/0.87
franchise to capture incremental growth in Africa. Also, we expect its
Stock borrowability Hard
earnings mix to turn more profitable, with sales in the high-margin, Major shareholders (%)
high-P/E consumer pack segment seen rising from 41% in FY10 to Extended Promoter Family 83.0
49% in FY13F, which should boost both earnings and valuations.

Mewah International Tanuj Shori
Valuation methodology: We value Mewah on an SOTP basis, ascribing 13x

(unchanged) to its bulk segment FY11F earnings (at a 20% discount to Wilmar) and
16x (unchanged) to its consumer pack FY11F earnings (at a 25% discount to Wilmar
and Chinese downstream companies) and build in our new earnings estimates to
arrive at our price target of S$1.34.
Investment risks: Lower-than-expected volume growth, muted margin expansion, or

a de-rating in valuation multiples on macro slowdown are risks to our estimates and PT.

Revenue 2,865 3,533 4,086 4,767 5,443
Gross profit 248 262 310 364 413
SG&A (128) (147) (170) (199) (227)
Operating profit 120 114 140 166 186
EBITDA 131 128 154 186 210

Depreciation (11) (13) (15) (21) (25)
Amortisation
EBIT 120 114 140 166 186
Associates & JCEs - 0 0 0 0
Other income
Income tax (27) (16) (27) (32) (36)
Other items - 5 - - -
Preferred dividends
Extraordinary items - (5) - - -
Reported NPAT 89 92 109 127 143
Dividends (48) (22) - - -

Reported P/E (x) 9.7 10.6 10.5 8.9 7.9 Strong EPS growth expected
Dividend yield (%) 5.5 2.2 - - -
Price/cashflow (x) 41.8 na 19.6 16.8 12.9
Price/book (x) 3.8 1.9 1.8 1.5 1.3
EV/EBITDA (x) 9.1 9.8 8.4 7.0 6.1
EV/EBIT (x) 9.9 10.9 9.3 7.9 6.9
Gross margin (%) 8.7 7.4 7.6 7.6 7.6
EBITDA margin (%) 4.6 3.6 3.8 3.9 3.9
EBIT margin (%) 4.2 3.2 3.4 3.5 3.4
Net margin (%) 3.1 2.6 2.7 2.7 2.6
Dividend payout (%) 53.8 23.9 - - -
Capex to sales (%) 0.7 1.3 3.0 1.6 1.1
ROE (%) 41.7 24.8 19.3 18.7 17.6
ROA (pretax %) 18.7 13.6 12.5 12.6 12.5
Growth (%)
Revenue (12.5) 23.3 15.7 16.7 14.2
EBITDA (2.4) (2.9) 20.9 20.9 12.8
EBIT (3.2) (5.1) 22.0 18.7 12.2
Normalised EPS 0.5 6.9 (3.2) 17.3 12.4
Normalised FDEPS 0.5 6.9 (3.2) 17.3 12.4
Per share
Reported EPS (US$) 0.07 0.07 0.07 0.08 0.09
Norm EPS (US$) 0.07 0.07 0.07 0.08 0.09
DPS (US$) 0.04 0.02 - - -

Cashflow (US$mn)
EBITDA 131 128 154 186 210
Change in working capital (60) (135) (66) (81) (80)
Cashflow from operations 21 (31) 58 68 88
Free cashflow (1) (77) (64) (8) 29
Reduction in investments - (0) - - -
Net acquisitions
Reduction in other LT assets - (4) - - -
Addition in other LT liabilities (12) (9) - - -
Adjustments 18 24 12 (0) 0
Cashflow after investing acts 5 (66) (53) (8) 29
Cash dividends (48) (22) - - -
Equity issue - 187 - - -
Debt issue 26 105 - - -
Others 15 (27) - - -
Cashflow from financial acts (8) 244 - - -
Net cashflow (2) 178 (53) (8) 29
Beginning cash 40 37 215 163 154
Ending cash 37 215 163 154 184
Ending net debt 183 111 163 172 143

Inventories 142 244 282 328 375
Total current assets 530 1,006 1,058 1,178 1,336
LT investments - 0 0 0 0
Fixed assets 173 218 314 369 403
Goodwill - 5 5 5 5
Other intangible assets
Other LT assets - 4 4 4 4
Total assets 704 1,234 1,381 1,557 1,749
Short-term debt 207 308 308 308 308
Stable cash cycle
Long-term debt 14 18 18 18 18
Convertible debt
Total liabilities 465 724 763 812 860
Preferred stock
Common stock 0 187 187 187 187
Retained earnings 259 330 439 566 709
Proposed dividends
Other equity and reserves (21) (10) (10) (10) (10)
Total shareholders' equity 237 508 616 744 887
Total equity & liabilities 704 1,234 1,381 1,557 1,749
Liquidity (x)
Current ratio 1.24 1.46 1.45 1.51 1.62
Interest cover 35.2 20.3 38.0 26.3 27.6
Leverage
Net debt/EBITDA (x) 1.40 0.87 1.06 0.92 0.68
Net debt/equity (%) 77.3 21.8 26.5 23.1 16.1
Activity (days)
Days receivable 34.1 36.5 41.1 41.1 41.4
Days inventory 15.7 21.5 25.4 25.3 25.5
Days payable 20.6 21.6 26.3 26.3 26.4
Cash cycle 29.2 36.5 40.2 40.2 40.5

Keppel Corp K E P S P
C O N G L O M E R AT E S | S I N G AP O R E Maintained
Lisa Lee +65 6433 6979 lisa.lee@nomura.com

Yuan Yiu Tsai +65 6433 6964 yuanyiu.tsai@nomura.com BUY
We reiterate our BUY on Keppel, with an above-consensus PT of S$15. During our Price target S$15.00
(set on 28 J an 11)
NDR in March, management maintained a positive outlook for new offshore orders Upside/downside 22.3%
against the backdrop of increased regulation and firm oil prices. Meanwhile, Difference from consensus 15.4%
property earnings remain steady while the contribution from infrastructure should
improve. Keppel is our top pick within the sector, as we see scope for further re-
Difference from consensus -9.0%
rating upon new order momentum given undemanding valuations. Sourc e: Nomura
 Catalysts
A resurgence in new jack-ups, semi-subs and production contract awards, on the Nomura vs consensus
back of firm and rising oil prices, plus a robust take-up in office property projects.
Our FY12F earnings forecast and
Anchor themes price target are above consensus, on
We maintain our positive view on Singapore offshore rig builders as oil prices trade a more positive outlook for the
within capex-positive levels. We believe robust financials built in the upcycle in offshore & marine and office property
2005-08 will stand them in good stead to replenish orderbooks going forward. segments.
Order momentum to continue Key financials & valuations

31 Dec (S$mn) FY09 FY10 FY11F FY12F
Revenue 12,247 9,783 9,572 10,721
 Look for recovery of semisub orders in 2Q/3Q11 Reported net profit 1,625 1,623 1,156 1,350
Normalis ed net profit 1,265 1,419 1,156 1,350
Management believes the strong recovery in rig orders since 4Q10
Normalis ed EPS (S$) 0.79 0.89 0.73 0.85
reflects a pick-up in replacement demand as heightened regulatory Norm. EPS growth (%) 15.9 12.2 (18.5) 16.8
requirements prompt oil majors to invest in new rigs rather than Norm. P/E (x) 15.4 13.8 16.9 14.5
EV/EBITDA (x) 9.3 9.1 11.3 9.8
extend old obsolete structures. Order enquiries remain healthy and
Price/book (x) 2.5 2.3 2.4 2.2
management expects 2011F to be a strong year for rig orders. We Dividend yield (% ) 3.1 3.4 3.4 3.4
look for semisub order momentum to return in 2Q/3Q along with the ROE (%) 30.7 25.5 17.1 19.0
ASP uptrend for drillships and a potential tightening of the charter Net debt/equity (% ) net cash net cash 1.8 0.8
Earnings revisions
market led by spill-over demand from Petrobras. Previous norm. net profit 1,419 1,156 1,350
Change from previous (%) - - -
 Optimising shipyard capacity globally Previous norm. EPS (S$) 0.89 0.73 0.85
Sou rce: C ompa ny, N omura e sti mates
Keppel remains optimistic on taking more orders as its capacity is only
starting to see the recovery. The group is refreshing its strategy to Share price relative to MSCISG
optimise its capacity and capabilities across the globe. For example, it (S$) Price Rel MSCISG
is looking at converting some ship repair capacity in the Philippines to 13 130
fabricate pontoons and modules of jack-ups and semisubs. We 12 120

11 110
highlight that its AmFELS yard in Brownsville, Texas, has capacity to
10 100
execute more jack-up orders for delivery in 2013.
9 90
8 80
 Looking beyond the EPS decline in FY11F
Mar10
May10
Sep10
Jul10
Nov 10
Jan11
We believe the anticipated EPS decline in FY11F (-19% y-y, on our

1m 3m 6m
estimates) reflects the lull in new orders won over 4Q08-2Q10 and
Absolute (S$) 6.6 9.1 36.5
has been well flagged. The market should be looking towards more Absolute (US$) 7.3 11.5 42.1
robust growth in FY12F and beyond with the recent strong inflow of Relative to Index 5.0 14.0 38.7
new orders, in our view. Estimated free float (%) 68.4
52-week range (S$) 12.26/ 8.37
 Reiterate BUY – above-consensus PT of S$15 3-mth avg daily turnover (US$m n) 48.24
Stock borrowability Easy
We highlight our above-consensus PT of S$15 for 22% potential upside. Major shareholders (% )
Despite its 3-month outperformance of 14% relative to MSCI Singapore, T emasek Holdings 21.6
we expect a continued re-rating underpinned by O&M order momentum.

Sou rce: C ompa ny, N omura e sti mates
We believe valuations remain attractive, with both P/E and P/BV trading
near the five-year mean.

Keppel Corp Lisa Lee
Valuation and risks

Our SOTP valuation and PT for Keppel Corp are unchanged.
Exhibit 49. Keppel Corp: SOTP valuation

SOTP valuation of group businesses Value per KCL
(S$mn) Value Comments share (S$) % of SOTP
Offshore/rig-building (100%) 17,012.5 Based on NPV of O&M earnings 10.60 67.0
Infrastructure (includes Kgreen Trust) 2,308.2 DCF Cogen/NPVQatar. KGT market. 1.44 9.1
Property - KepLand 4,373.8 Fair value of KepLand 2.72 17.2
Property - trust 128.3 Market value of K-Reit 0.08 0.5
Keppel Bay devt 1,067.5 NPV of Keppel Bay 0.66 4.2
KepT&T (81%) 169.1 Market value of Kep T&T (less M1) 0.11 0.7
k1 Ventures (42%) 100.7 Market value of k1 Ventures 0.06 0.4
M1 stake 537.2 Price target of M1 0.33 2.1
Estimated net cash/investments (300.0) (0.19) (1.2)
Total value of KCL group 25,397.3
RNAV of Keppel Corporation S$15.82 S$ per share 15.82 100
Price target (based on 5% discount to RNAV) S$15.00 S$ per share (rounded from S$15.03)
Source: Company data, Nomura estimates
Risks to our price target

Our price target could be negatively affected by: 1) a larger-than-expected fall in the
group’s O&M margins; 2) a significant and continued decline in orderbook build-up; 3)
a bigger-than-expected decline in the asset values and rents/sales at its property
division; and/or 4) a collapse in margins or revenue at its infrastructure division.

Incom e statem ent (S$m n)
Year-end 31 Dec FY08 FY09 FY10 FY11F FY12F
Revenue 11,805 12,247 9,783 9,572 10,721
Gross profit 3,173 3,438 3,572 2,872 2,986
SG&A (1,934) (1,934) (1,816) (1,549) (1,431)
Operating profit 1,238 1,505 1,756 1,322 1,556 FY11F EBIT declines based
on lower O&M due to gap
EBITDA 1,378 1,679 1,941 1,518 1,763 year in new orders in 2009
Depreciation (139) (174) (185) (196) (208) and in 2Q/3Q10
EBIT 1,238 1,505 1,756 1,322 1,556
Net interest expense 4 29 55 64 65
Associates & JCEs 354 322 215 250 258
Other income - (38) 457 - -
Earnings before tax 1,597 1,817 2,483 1,636 1,879
Income tax (288) (348) (581) (260) (283)
Norm alised NPAT 1,085 1,265 1,419 1,156 1,350
Extraordinary items 13 361 204 - -
Reported NPAT 1,098 1,625 1,623 1,156 1,350
Dividends (555) (602) (666) (666) (666)
Transfer to reserves 543 1,023 957 490 684

Reported P/E (x) 17.7 12.0 12.0 16.9 14.5
Dividend yield (%) 2.9 3.1 3.4 3.4 3.4
Price/cashflow (x) 8.8 8.7 20.2 9.9 8.1
Price/book (x) 2.6 2.5 2.3 2.4 2.2
EV/EBITDA (x) 11.3 9.3 9.1 11.3 9.8
EV/EBIT (x) 12.3 10.2 10.0 12.7 11.0
Gross margin (%) 26.9 28.1 36.5 30.0 27.9
EBITDA margin (%) 11.7 13.7 19.8 15.9 16.4
EBIT margin (%) 10.5 12.3 18.0 13.8 14.5
Net margin (%) 9.3 13.3 16.6 12.1 12.6
Dividend payout (%) 50.5 37.1 41.0 57.6 49.3
Capex to sales (%) 3.4 3.9 9.9 7.2 6.4
ROE (%) 22.4 30.7 25.5 17.1 19.0
ROA (pretax %) 11.1 12.7 12.7 9.2 10.3
Grow th (%)
Revenue 13.2 3.7 (20.1) (2.2) 12.0
EBITDA 17.1 21.9 15.6 (21.8) 16.1
EBIT 17.9 21.5 16.7 (24.7) 17.6
Normalised EPS 91.7 15.9 12.2 (18.5) 16.8
Normalised FDEPS 91.7 15.9 12.2 (18.5) 16.8
Per share
Reported EPS (S$) 0.69 1.02 1.02 0.73 0.85
Norm EPS (S$) 0.68 0.79 0.89 0.73 0.85
DPS (S$) 0.35 0.38 0.42 0.41 0.41

Cashflow (S$mn)
EBITDA 1,378 1,679 1,795 1,514 1,679
Change in working capital 691 399 152 88 357
Other operating cashflow 140 175 185 196 234
Cashflow from operations 2,208 2,252 2,133 1,798 2,270
Free cashflow 1,808 1,772 1,553 1,108 1,580
Reduction in investments 382 (198) (79) 33 (302)
Net acquisitions (300) 637 (250) (250) (300)
Reduction in other LT assets 39 116 (1) 235 (160)
Addition in other LT liabilities (8) 231 212 213 213
Adjustments (56) (650) (673) (646) (385)
Cashflow after investing acts 1,865 1,908 762 693 646
Cash dividends (1,098) (602) (602) (602) (602)
Equity issue - - - - -
Debt issue - - - - -
Others (124) (615) (746) (208) -
Cashflow from financial acts (1,222) (1,217) (1,348) (810) (602)
Net cashflow 644 690 (587) (117) 44
Beginning cash 1,601 2,245 2,936 2,349 2,231
Ending cash 2,244 2,935 2,349 2,232 2,275
Ending net debt (275) (1,177) (238) (5) (49)

Cash & equivalents 2,245 2,936 2,349 2,231 2,276
Marketable securities 331 457 502 527 676
Inventories 3,319 3,178 3,004 3,063 2,883
LT investments 3,131 3,203 3,237 3,178 3,332
Fixed assets 1,947 2,157 2,637 3,117 3,597
Goodwill - - - - -
Other LT assets 3,477 3,361 3,362 3,127 3,287
Total assets 16,746 17,307 17,158 17,329 17,960
Short-term debt 226 841 1,009 1,125 1,125
Total current liabilities 4,990 5,581 5,779 6,059 6,062 Healthy balance sheet, net
Long-term debt 1,745 918 1,102 1,102 1,102 cash allows strategic
Convertible debt - - - - - investment opportunities, in
Other LT liabilities 381 412 424 437 450 our view
Common stock 825 833 833 833 833
Proposed dividends 2,882 1,683 1,700 1,483 1,416
Liquidity (x)
Current ratio 1.64 1.54 1.37 1.30 1.28
Interest cover na na na na na
Leverage
Net debt/EBITDA (x) net cash net cash net cash net cash net cash
Net debt/equity (%) net cash net cash net cash net cash net cash
Activity (days)
Days receivable 57.7 55.1 59.6 57.5 51.6
Days inventory 129.5 134.6 146.5 131.7 119.8
Days payable 148.6 165.6 190.1 173.6 160.4
Cash cycle 38.6 24.1 16.0 15.6 11.0

Yangzijiang Shipbuilding Y Z J S P
I N D U S TR I AL S / C AP I T AL G O O D S | S I N G AP O R E Maintained
Yuan Yiu Tsai +65 6433 6964 yuanyiu.tsai@nomura.com

Lisa Lee +65 6433 6967 lisa.lee@nomura.com BUY
We believe YZJ is undervalued on an SOTP basis (non-core assets at book value Price target S$2.30
(set on 7 Mar 11)
on our estimates) and the market has underappreciated the potential of a Upside/downside 27.3%
~US$2.2bn containership order from Seaspan. While margins will likely be low, a Difference from consensus -1.1%
successful execution of the potential order would be a significant technological
FY12F net profit (RMBmn) 3,735
breakthrough for YZJ. Reiterate BUY and PT of S$2.30.
Difference from consensus na
Containership order momentum and shipyard M&A (at a reasonable valuation)

Anchor themes Nomura vs consensus
The Chinese shipbuilding industry is an attractive long-term investment theme, in While our PT is largely in line, we
our view. Besides strong government support, Chinese shipyards enjoy a natural back our BUY call with a detailed
advantage in competitive labour cost, steel supply, abundance of coastal land and valuation methodology which
a large pool of domestic owners/carriers as a customer base. strengthens our conviction in its
attractive valuation.
Undervalued, underappreciated Key financials & valuations

31 Dec (RMBmn) FY10 FY11F FY12F FY13F
Revenue 12,923 16,338 20,601 22,863
 LOI signed with Seaspan – US$2.2bn order potential Reported net profit 2,955 3,398 3,735 3,442
We believe the market has underappreciated the US$2.2bn order Normalised net profit 2,955 3,398 3,735 3,442
Normalised EPS (RMB) 0.80 0.89 0.97 0.90
potential from Seaspan for up to 22 units of 10,000 TEU Norm. EPS growth (% ) 32.3 10.9 9.9 (7.8)
containerships (The well-publicized order from Seaspan, 16 March Norm. P/E (x) 10.4 10.5 9.5 10.4
EV/EBITD A (x) 9.1 9.8 7.8 7.7
2011). While margins will likely be muted and confirmation of orders
Price/book (x) 3.5 2.9 2.3 2.0
will be staged in batches, a successful execution of the potential order Dividend yield (%) 2.8 2.5 2.5 2.5
would be a significant technological breakthrough for YZJ, which will RO E (%) 28.7 25.7 23.5 18.5
Net debt /equity (% ) net cash net cash net cash net cash
position it well to win the next batch of large containership orders with
Earnings r evisions
better margins upon a more pronounced recovery in the container Previous norm. net profit 3,398 3,735 3,442
shipping market over the medium term. Change from previous (% ) - - -
Previous norm. EPS (RMB) 0.89 0.97 0.90
 Reiterate BUY – focus on SOTP valuation
Although the market does not appear to favour management’s Share price relative to MSCISG
diversification strategy (ie plans to enter property development and (S$) Price Rel MSCISG
2.2 170
growing investment income), we believe the current share price (down 2.0 160
150
12% from its recent peak vs STI’s -5%) presents an attractive entry 1.8 140
1.6 130
level, with 27% potential upside, as implied by our PT. Our Street- 120
1.4
differentiating SOTP methodology values the company’s core 1.2
110
100
shipbuilding franchise at 2.5x FY13F P/B (reflecting normalised ROE 1.0 90
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct10
post-crisis) and its excess net cash/investments at book value.

1m 3m 6m
 Catalysts: containership orders, offshore M&A Absolute (S$) 0.6 (6.2) 2.8
Absolute (US$) 1.2 (4.2) 7.0
Seaspan’s newbuild strategy reflects the current containership order Relat ive to Index (1.1) (1.6) 3.6
dynamics, in our view – supply/demand is more balanced relative to Mark et cap (U S$mn) 5,305
bulk carriers and shipowners are taking advantage of the attractive Estimated free float (% ) 46.5
52-week range (S$) 2.05/1.16
pricing (-25% from peak in 2007/08) to position themselves for a more 3-mth avg daily turnover (US$mn) 23.98
pronounced recovery in freight rates over the medium term. In this Stock borrowability Hard
regard, we believe YZJ is well-placed to benefit from the order
Ren Yuanlin 29.2
momentum. With a net-cash balance sheet and strong government Lido Point Inv est ments 14.0
support, YZJ is also well-positioned to acquire, we believe. If Cosco’s Sou rce: Comp any, Nom ura estim ates
premium valuation (FY11F: 18x P/E, 3.4x P/B) is any guide, we

believe acquisition of a meaningful offshore exposure at a reasonable
valuation would be a key re-rating factor for YZJ.

Yangzijiang Shipbuilding Yuan Yiu Tsai
Reiterate BUY
Undervalued, underappreciated
Valuation: SOTP is key to identifying its value
Although the market does not appear to favour management’s diversification strategy,
we argue that these diversification efforts will only materialise over the medium term,
and the stock (down 12% from its recent peak touched in November 10 vs the STI’s
5% decline over the same period) is undervalued at the current level.
As YZJ’s non-shipbuilding income grows, we think investors should view its stock We value YZJ on an SOTP basis,
valuation on an SOTP basis. We highlight our Street-differentiating SOTP valuation for while most of the Street values it
with a target P/E or P/B multiple
YZJ (methodology unchanged):
 DCF valuation of existing high-margin orderbook. We conservatively value the

remaining outstanding payments of YZJ’s existing high-margin orders at RMB2.4bn
by DCF (vs. orderbook value of ~RMB 21bn, a portion of which has been
monetised as deposits).
 Core shipbuilding franchise at 2.5x FY13F P/B (at normalised ROE of 17.5%). Our methodology captures the
As YZJ delivers all its high-margin orders by end-2012, we expect its core ROE to imminent fall in margins, another
key investor concern
fall from 35% in FY11F to 17.5% in FY13F, reflecting the normalised gross margins
and increase in working capital as payment terms deteriorate. We derive a target
P/B of 2.5x based on the Gordon Growth model (17.5% ROE, 10% cost of equity
and 5% growth rate).
 Excess net cash/non-core investments at book value. We value the company’s

excess net cash and non-core investments at book value, notwithstanding the high
returns generated by the financial products.
Exhibit 50. YZJ: SOTP valuation

Revenue in FY13F (RMBmn) 22,863
Operating profit 3,217
EBIT margin (%) 14.1
(Net Interest) 166
(Tax) (406)
Net profit 2,977
2013F Shareholders equity (ex investments) 16,979
Sustainable core ROE 17.5%
Cost of Equity 10.0%
Growth rate 5%
Target P/B multiple (2013F) 2.5
2013F core book value (ex-cash/investments) 16,979
Equity value 2013F 42,784
SOTP valuation
PV (2013F Equity value) 39,116
DCF Value of existing orderbook 2,365
Excess net-near cash & investments at book value 4,048
Total (RMBmn) 45,529
Total (S$mn) 8,841
Price target 2.30
2011 P/E (implied) 13.3
2011F ROAE 30.0
Key risks include: 1) input cost pressure (steel, labour); and 2) RMB appreciation,
which would impact margins as shipbuilding contracts are denominated in USD.

Income statement (RMBmn)
Revenue 10,624 12,923 16,338 20,601 22,863
Gross profit 2,235 2,908 3,291 3,918 3,450
SG&A (213) (221) (226) (233) (233)
Employee share expense - - - - -
Operating profit 2,022 2,687 3,065 3,685 3,217
EBITDA 2,152 2,855 3,237 3,867 3,403

Depreciation (130) (169) (172) (182) (186)
EBIT 2,022 2,687 3,065 3,685 3,217
Associates & JCEs (3) (2) - - -
Other income 93 93 100 100 100
Earnings before tax 2,464 3,629 4,136 4,544 4,185
Income tax (260) (677) (744) (818) (753)
Minority interests - 3 7 8 10
Normalised NPAT 2,205 2,955 3,398 3,735 3,442
Extraordinary items
Reported NPAT 2,205 2,955 3,398 3,735 3,442
Dividends (639) (858) (889) (889) (889)
Transfer to reserves 1,565 2,098 2,509 2,845 2,553

Reported P/E (x) 15.0 10.4 10.5 9.5 10.4
Dividend yield (%) 1.9 2.8 2.5 2.5 2.5
Price/cashflow (x) 14.9 8.4 na 192.9 12.2
Price/book (x) 5.6 3.5 2.9 2.3 2.0
EV/EBITDA (x) 13.1 9.1 9.8 7.8 7.7
EV/EBIT (x) 13.9 9.6 10.3 8.2 8.1
Gross margin (%) 21.0 22.5 20.1 19.0 15.1
EBITDA margin (%) 20.3 22.1 19.8 18.8 14.9
EBIT margin (%) 19.0 20.8 18.8 17.9 14.1
Net margin (%) 20.8 22.9 20.8 18.1 15.1
Dividend payout (%) 29.0 29.0 26.2 23.8 25.8
Capex to sales (%) 1.3 6.0 18.4 3.9 3.3
ROE (%) 28.3 28.7 25.7 23.5 18.5
Earnings decline in FY13F as
ROA (pretax %) 15.4 16.2 14.5 15.9 14.0
most of its high-margin orders
are delivered in FY11/12
Growth (%)
Revenue 44.4 21.6 26.4 26.1 11.0
EBITDA 66.5 32.7 13.4 19.5 (12.0)
EBIT 68.1 32.9 14.1 20.2 (12.7)
Normalised EPS 48.5 32.3 10.9 9.9 (7.8)
Normalised FDEPS 48.5 32.3 10.9 9.9 (7.8)
Per share
Reported EPS (RMB) 0.60 0.80 0.89 0.97 0.90
Norm EPS (RMB) 0.60 0.80 0.89 0.97 0.90
Fully diluted norm EPS (RMB) 0.60 0.80 0.89 0.97 0.90
Book value per share (RMB) 1.73 2.68 3.24 3.98 4.65
DPS (RMB) 0.18 0.23 0.23 0.23 0.23

Cashflow (RMBmn)
EBITDA 2,152 2,855 3,237 3,867 3,403
Change in working capital 501 692 (4,141) (2,268) 590
Other operating cashflow (437) 109 (828) (1,414) (1,070)
Cashflow from operations 2,216 3,656 (1,732) 185 2,924
Capital expenditure (139) (778) (3,000) (800) (750)
Free cashflow 2,077 2,878 (4,732) (615) 2,174
Reduction in investments (1,661) (3,843) 2,919 1,501 1,548
Net acquisitions
Reduction in other LT assets (199) (547) (1,334) 167 (213)
Addition in other LT liabilities 151 264 21 22 24
Adjustments 634 283 1,155 1,455 1,284
Cashflow after investing acts 1,003 (964) (1,971) 2,531 4,816
Cash dividends (311) (618) (889) (889) (889)
Equity issue - 1,283 - - -
Debt issue 415 109 - - -
Others 0 152 - - -
Cashflow from financial acts 104 925 (889) (889) (889)
Net cashflow 1,108 (39) (2,860) 1,641 3,927
Beginning cash 5,679 6,787 6,747 3,887 5,529
Ending cash 6,787 6,748 3,887 5,528 9,456
Ending net debt (5,849) (5,521) (2,660) (4,302) (8,229)
Balance sheet (RMBmn)

Marketable securities 1,715 5,213 4,170 3,336 2,669
Inventories 837 1,277 1,087 1,390 1,618
Other current assets 70 641 1,121 1,334 1,447
LT investments 3,080 3,424 1,548 881 -
Fixed assets 1,967 2,630 5,458 6,076 6,640
Goodwill - - - - -
Other LT assets 655 1,202 2,536 2,369 2,582
Total assets 20,411 26,176 26,841 28,926 32,032
Short-term debt 907 906 906 906 906
Other current liabilities 11,600 10,834 8,560 7,078 7,088
Long-term debt 30 320 320 320 320
Minority interest - 150 143 135 126
Common stock 4,980 6,263 6,263 6,263 6,263
Other equity and reserves (2,339) (2,015) (2,015) (2,015) (2,015)
Liquidity (x)
Current ratio 1.06 1.23 1.28 1.54 1.72
Leverage
Activity (days)
Days receivable 183.6 146.1 134.9 133.7 124.8
Days inventory 50.3 38.5 33.1 27.2 28.3
Days payable 53.0 91.3 106.8 96.0 93.9
Cash cycle 180.9 93.3 61.2 64.8 59.1

Neptune Orient Lines N O L S P

TR AN S P O R T/ L O G I S TI C S | S I N G AP O R E Maintained
NOMURA INTERNATIONAL (HK) LIMITED
Andrew Lee +852 2252 6197 andrew.lee@nomura.com

Cecilia Chan +852 2252 6181 cecilia.chan@nomura.com BUY
As we estimate container freight rates are close to bottoming and quarterly Price target S$2.60
(set on 24 J an 11)
earnings are set to rebound after 1Q11, we remain optimistic on the container
shipping sector. NOL is our preferred pick due to slightly better pricing power from Difference from consensus 11.1%
being a premium carrier and lack of capacity growth in 2011. With 33% potential
upside to our S$2.60 target price, we reiterate our BUY rating. FY12F net profit (US$mn) 451.5
Catalysts include: 1) rebound in freight rates, 2) continued strong economic

indicators such as ISM, retail sales, consumer spending and lower unemployment. Nomura vs consensus
Anchor themes Our earnings forecast is in line with
consensus, but our higher price
With share prices driven by directional movement in freight rates, we believe freight
target reflects the S$0.36/share
rates are bottoming, especially as we approach the early peak season period. In
value we attach to NOL’s terminal
fact, we expect rates and quarterly earnings to bottom in 1Q11. Furthermore,
business.
inventory levels remain low, as highlighted by US inventory-to-sales ratios.
Top pick in container shipping Key financials & valuations

Revenue 9,422 10,517 12,514 14,377
 Container sector close to bottoming Reported net profit 460.9 353.3 451.5 494.2
Normalised net profit 510 353 451 494
1Q11 margins and earnings are likely to continue their sequential Normalised EPS (US$) 0.198 0.137 0.175 0.191
declines given average spot rates declined 6% and bunker prices Norm. EPS growt h (% ) na (30.8) 27.8 9.5
were 25% q-q higher. However, we believe quarterly earnings are set Norm. P/E (x) 7.4 11.1 8.7 8.1
EV/EBITD A (x) 4.6 5.7 4.9 4.3
to rebound, as we estimate freight rates are close to bottoming as we Price/ book (x) 1.2 1.1 1.0 0.9
begin to approach the beginning of the peak season, while carriers Dividend yield (%) 2.3 1.8 2.3 2.5
are beginning to collect fuel surcharges (BAF). We remain optimistic ROE (%) 15.3 10.5 12.3 12.2
Net debt /equity (% ) 11.9 7.4 11.5 3.4
on demand driven by global economic growth and improving
Earnings r evisions
consumer spending as a result of declining unemployment. Previous norm. net profit 353.3 451.5 494.2
Furthermore, the US inventory-to-sales ratio has fallen back to its Change from previous (% ) - - -
recent lows. With 1Q volumes tracking below expectations and our Previous norm. EPS (US$) 0.137 0.175 0.191
positive view on demand, this could lead to pent-up demand and
higher-than-expected peak season surcharges. A key risk, in our view, Share price relative to MSCISG
is irrational carrier pricing behaviour.
(S$) Pr ice Rel MSCISG
2.6 115
 NOL – preferred pick within sector 2.4
110
105
Within the container shipping sector, we prefer premium carriers and 2.2 100
2.0 95
a lack of new additional capacity, as this allows slightly better pricing 90
1.8
power and a less aggressive pricing discounting strategy. We view 85
1.6 80
NOL as a premium carrier with no newbuilds slated to be delivered
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct 10
this year. Amongst the different routes, we estimate transpacific

freight rates to be the only route to increase (+1.4% y-y) in 2011 due 1m 3m 6m
to annual contracts. NOL has relatively higher exposure to transpacific Absolute (S$) (4.4) (11.7) (1.0)
Absolute (US$) (3.7) (9.7) 3.1
routes (53% revenue compared to 38% for the sector).
Relative to Index (7.5) (8.6) (1.8)
 Buy with 33% potential upside to S$2.60 PT Estimated free float (% ) 32.5
52-week range (S$) 2.38/ 1.76
With 33% potential upside to our current S$2.60 target price, we 3-mth avg daily turnover (US$mn) 19.80
maintain our Buy rating. Our target price is based on a sum-of-the- Stock borrowability Hard
parts analysis, with the shipping business valued at mid-cycle 1.1x Major shareholders (% )
Temasek Holdings 67.0
P/B and an 8x EV/EBITDA multiple for the port business. Key
company and industry risks include potential terminal divestment and Sou rce: Comp any, Nom ura estim ates
a global economic slowdown, respectively.

Neptune Orient Lines Andrew Lee
Revenue 6,516 9,422 10,517 12,514 14,377
Gross profit 860 2,368 2,452 2,928 3,342
SG&A (1,414) (1,764) (2,016) (2,397) (2,759)
Operating profit (553) 604 436 531 583
EBITDA (267) 889 732 882 968

Depreciation (286) (285) (296) (351) (385)
Amortisation
EBIT (553) 604 436 531 583
Earnings recovering into 2012
Other income
Earnings before tax (585) 579 408 507 554
Income tax (39) (66) (51) (52) (56)
Net profit after tax (624) 513 356 455 497
Other items
Preferred dividends
Normalised NPAT (626) 510 353 451 494
Extraordinary items (115) (49) - - -
Reported NPAT (741) 461 353 451 494
Dividends - (88) (71) (90) (99)
Transfer to reserves (741) 373 283 361 395

FD normalised P/E (x) na 7.4 11.1 8.7 8.1
FD normalised P/E at price target (x) na 9.8 14.7 11.6 10.8
Reported P/E (x) na 8.2 11.1 8.7 8.1
Dividend yield (%) - 2.3 1.8 2.3 2.5
Price/cashflow (x) na 5.4 5.5 5.0 4.5
Price/book (x) 1.3 1.2 1.1 1.0 0.9
EV/EBITDA (x) na 4.6 5.7 4.9 4.3
EV/EBIT (x) na 6.8 9.4 8.2 7.1
Gross margin (%) 13.2 25.1 23.3 23.4 23.2
EBITDA margin (%) (4.1) 9.4 7.0 7.0 6.7
EBIT margin (%) (8.5) 6.4 4.1 4.2 4.1
Net margin (%) (11.4) 4.9 3.4 3.6 3.4
Effective tax rate (%) na 11.4 12.6 10.3 10.2
Dividend payout (%) na 19.2 20.0 20.0 20.0
Capex to sales (%) 1.4 5.0 4.8 7.2 3.5
ROE (%) (27.9) 15.3 10.5 12.3 12.2
ROA (pretax %) (11.0) 11.6 7.9 8.9 8.9
Growth (%)
Revenue (29.8) 44.6 11.6 19.0 14.9
EBITDA (141.1) na (17.7) 20.6 9.7
EBIT (243.0) na (27.8) 21.8 9.8
Normalised EPS (241.7) na (30.8) 27.8 9.5
Normalised FDEPS (241.7) na (30.8) 27.8 9.5
Per share
Reported EPS (US$) (0.37) 0.18 0.14 0.17 0.19
Norm EPS (US$) (0.31) 0.20 0.14 0.17 0.19
Fully diluted norm EPS (US$) (0.31) 0.20 0.14 0.17 0.19
DPS (US$) - 0.03 0.03 0.03 0.04

Neptune Orient Lines Andrew Lee
Cashflow (US$mn)
EBITDA (267) 889 732 882 968
Change in working capital (241) 4 66 (17) 14
Other operating cashflow (43) (200) (83) (80) (89) Capex primarily for fleet
Cashflow from operations (551) 693 714 785 893 expansion
Free cashflow (640) 222 214 (115) 393
Reduction in investments (11) (15) - - -
Net acquisitions 26 35 - - -
Reduction in other LT assets (5) (19) (0) - -
Addition in other LT liabilities 40 8 - - -
Adjustments (35) 13 0 - -
Cashflow after investing acts (624) 243 214 (115) 393
Cash dividends (39) - (92) (71) (92)
Debt issue (388) 407 (21) (20) (371)
Others (11) (7) 0 - -
Cashflow from financial acts 527 401 (113) (91) (463)
Net cashflow (96) 644 102 (206) (70)
Beginning cash 429 333 977 1,079 873
Ending cash 333 977 1,079 873 803
Ending net debt 607 382 259 445 144

Cash & equivalents 333 977 1,079 873 803
Accounts receivable 815 1,082 1,059 1,260 1,447
Inventories 197 244 244 293 317
LT investments 77 91 91 91 91
Fixed assets 3,509 3,691 3,896 4,445 4,560
Goodwill 158 154 154 154 154
Other intangible assets
Other LT assets 92 112 112 112 112
Total assets 5,341 6,451 6,734 7,327 7,584
Short-term debt 21 21 18 19 20
Other current liabilities 1,085 1,302 1,325 1,498 1,667
Long-term debt 919 1,338 1,321 1,300 927
Convertible debt
Preferred stock
Common stock 1,810 1,815 1,815 1,815 1,815
Retained earnings 986 1,319 1,599 1,959 2,353
Proposed dividends - 88 71 90 99
Liquidity (x)
Current ratio 1.11 1.49 1.50 1.34 1.26
Interest cover (15.6) 19.9 12.8 17.7 16.6
Leverage
Net debt/EBITDA (x) na 0.43 0.35 0.50 0.15
Net debt/equity (%) 21.7 11.9 7.4 11.5 3.4
Activity (days)
Days receivable 46.0 36.7 37.1 33.9 34.4
Days inventory 11.5 11.4 11.0 10.2 10.1
Days payable 16.5 14.1 13.7 13.1 13.3
Cash cycle 41.0 34.0 34.5 31.1 31.2

Biosensors International B I G S P
H E AL T H C AR E & P H AR M AC E U TI C AL S | S I N G AP O R E Maintained
Jit Soon Lim, CFA +65 6433 6969 jitsoon.lim@nomura.com

Yuan Yiu Tsai +65 6433 6964 yuanyiu.tsai@nomura.com BUY

We reaffirm our BUY for BIG on the back of imminent approval for Terumo’s Nobori Price target S$1.50
(set on 8 Mar 11)
stent and strong earnings momentum in 3Q, in our view. With a US$1.3bn market
cap, BIG is no longer a start-up. The S$200mn placement has further strengthened Difference from consensus 22.0%
the group’s balance sheet, enabling it to evaluate potential M&A opportunities.
FY12F net profit (US$mn) 77.9
 Catalysts
Difference from consensus na
Continued momentum in its forthcoming results, the potential value-unlocking of its Source: Nomura
50% stake in domestic drug-eluting stent (DES) manufacturer in China, JWMS, and
Japanese approval of Terumo’s Nobori, whose technology is licensed from BIG. Nomura vs consensus
Anchor themes We believe consensus has not
The US$5bn DES industry is one of the most profitable segments in the medical recognised the potential of Terumo’s
technology space, with market share changes driven by innovation. Biosensors, accelerating royalties to BIG.
with its leading-edge technology, could be M&A targets for incumbents.
Japan – the next leg of growth Key financials & valuations

31 Mar (US$mn) FY10 FY11F FY12F FY13F
Revenue 116.2 154.3 206.8 273.1
 Robust EPS growth in FY12/13F Reported net profit 31.4 40.5 77.9 126.8
We highlight the robust EPS growth of 26%/63% in FY12/13F on the Normalised net profit 31.4 51.4 77.9 126.8
Normalised EPS (US$) 0.029 0.047 0.060 0.097
back of the higher contribution from Japan upon the imminent
Norm. EPS growt h (% ) na 60.8 26.2 62.8
approval for Nobori. We believe Nobori’s market share in Japan will Norm. P/E (x) 32.7 21.6 16.5 10.2
be initially boosted by the 3,200-patient clinical trial, enrolment for EV/EBITD A (x) 30.5 16.2 10.5 6.0
Price/ book (x) 6.3 2.7 2.7 2.1
which is expected to begin in May this year, and should continue to
Dividend yield (%) 0.0 0.0 0.0 0.0
gain momentum into FY13F. ROE (%) 25.3 16.1 19.6 25.3
Net debt /equity (% ) net cash net cash net cash net cash
 Strong revenue momentum for 9MFY11 Earnings r evisions
Previous norm. net profit 51.4 77.9 126.8
The group saw strong revenue momentum for 9MFY11 (+34% y-y),
Change from previous (% ) - - -
driven by further market share gains for BioMatrix/Nobori. We believe Previous norm. EPS (US$) 0.047 0.060 0.097
this momentum can be sustained with organic market share gains in Sou rce: Comp any, Nom ura estim ates
Asia, and the introduction of new products such as the bifurcation

stent and BioFreedom stent. We believe the market has yet to fully Share price relative to MSCISG
appreciate the significance of BioFreedom — CE Mark approval is (S$) Price Rel MSCISG
1.3 170
expected in FY12, according to the company, and this would be a 1.2 160
150
strong endorsement of BIG’s ability to grow. 1.1
140
1.0
130
0.9
 JWMS continues to be a key contributor 0.8
120
110
0.7 100
3QFY11 JWMS contributions remain robust (+43%y-y), despite 0.6 90
market concerns over ASP pressure. We continue to expect strong
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct 10
performance from the JV, underpinned by volume growth; according

1m 3m 6m
to Millennium Research, the Chinese DES market could overtake
Absolute (S$) - 1.8 16.2
Japan’s DES market this year, and is estimated to be worth Absolute (US$) 0.7 4.0 20.9
US$900mn by 2014. Relative to Index (1.7) 6.5 17.5
 Reiterate BUY – three pillars of growth Estimated free float (% )

52-week range (S$)
78.9
1.24/ 0.70
BIG is no longer a start-up company. In our view, its growth is 3-mth avg daily turnover (US$mn) 6.38
underpinned by: 1) a core franchise with a significant market share Stock borrowability Hard
(~15%); 2) 50%-owned JWMS, the No 2 player in China; and 3)
Hony Capital 21.1
accelerating royalties from Terumo (upon Nobori’s approval in Japan). Atlant is Invesments 8.2
With net cash of US$188mn, the group is well positioned to drive M&A, Sou rce: Comp any, Nom ura estim ates
further boosting earnings and competitiveness, in our view. BUY.

Biosensors International Jit Soon Lim, CFA
Japan — the next leg of growth

Exhibit 51. SOTP valuation; risks to our PT
(US$mn) Nomura comment
DES franchise 676 DCF of BioMatrix over 6 years (WACC: 9.7%), terminal value at 15x P/E (previously 12x) of trough
earnings of BioMatrix to reflect BIG’s recent acquisitions (CardioMind, AXXESS) and BioFreedom’s
pending CE mark approval
Base business 106 DCF (WACC: 9.7%, terminal value: 0%)
JWMS 434 20x FY11/12F P/E (previously 22x)
PV of Terumo royalties 231 DCF value (WACC: 9.7%) over five-year licensing agreement
Net cash/(debt) 214 End-FY11F
Total (US$mn) 1,660
Total (S$mn) 2,125
Diluted # of shares (‘000) 1,422 Assuming full dilution of outstanding options and warrants
Price target (S$/share) 1.50 Rounded off from 1.49
Key risks to PT:
1) Weakness in euro, ASP pressure worldwide.
2) Execution amid strong competition. Notwithstanding our positive view, BIG is still a small independent
DES company, which will continue to see competition from dominant competitors and face execution
issues per most small start-ups.
Key catalyst: Nobori’s approval in Japan – anytime now

Nobori has received preliminary regulatory clearance from the Ministry of Health and Nobori has received preliminary
Welfare of Japan, paving the way for the imminent approval of the stent (see our report, regulatory clearance from the
Nobori – one step closer to approval in Japan, 3 March 2011). The Nobori stent, which Ministry of Health and Welfare of
Japan, paving the way for the
is marketed by Terumo, has licensed Biosensors’ proprietary technology, including the
imminent approval of the stent
stent with biodegradable polymer and its proprietary Biolimus A-9 drug.
We estimate the DES market in Japan is worth approximately US$600mn, currently

dominated by the four US medtech giants (Johnson & Johnson, Boston Scientific,
Medtronic and Abbott). There is no locally made DES offered by Japanese medtech
companies. According to Millennium Research, Nobori’s market share will be
significant upon its launch given Japanese physicians’ loyalty to local companies
(Abbott Vascular Targets Asia Pacific, 22 April 2010). In its recent 4Q10 results,
Boston Scientific (BSX) warned of potential market share loss in Japan on the back of
the launch of a new product by a “Japanese competitor” in early 2011 (presumably
Terumo, in our view).
Moreover, Kyoto University has announced that it will conduct a 3,200 patient DES trial
with Nobori, measuring it against Abbott’s Xience V stent. We think this trial could
provide a lift to the initial market share gain momentum as doctors enrol their patients
into this trial.


Year-end 31 Mar FY09 FY10 FY11F FY12F FY13F
Revenue 74 116 154 207 273 Strong contributions from
JWMS
Cost of goods sold (29) (32) (35) (44) (49)
Gross profit 44 84 119 163 224
SG&A (68) (64) (74) (90) (94)
Operating profit (23) 21 45 73 130
EBITDA (20) 24 48 77 133

Depreciation (3) (3) (3) (3) (3)
Amortisation (1) (0) (0) (0) (0)
EBIT (23) 21 45 73 130
Other income (6) 1 (1) 1 1
Earnings before tax (24) 33 58 92 153
Income tax (10) (2) (6) (14) (26)
Net profit after tax (34) 31 51 78 127
Minority interests - - - - -
Other items
Normalised NPAT (34) 31 51 78 127
Extraordinary items 33 - (11) - -
Reported NPAT (1) 31 40 78 127
Dividends - - - - -
Transfer to reserves (1) 31 40 78 127

FD normalised P/E (x) na 32.7 21.6 16.5 10.2
FD normalised P/E at price target (x) na 42.6 28.1 21.6 13.2
Reported P/E (x) na 29.0 24.3 15.2 9.3
Dividend yield (%) - - - - -
Price/cashflow (x) 77.2 71.0 28.0 27.3 12.3
Price/book (x) 8.1 6.3 2.7 2.7 2.1
EV/EBITDA (x) na 30.5 16.2 10.5 6.0
EV/EBIT (x) na 33.1 17.0 10.9 6.1
Gross margin (%) 60.2 72.6 77.1 78.8 82.1
EBITDA margin (%) (26.7) 20.5 30.9 37.0 48.7
EBIT margin (%) (31.5) 17.9 28.9 35.5 47.5
Net margin (%) (1.5) 27.0 26.2 37.7 46.4
Effective tax rate (%) na 4.9 11.0 15.1 17.1
Dividend payout (%) na - - - -
Capex to sales (%) 6.4 1.8 1.4 1.1 0.8
ROE (%) (1.1) 25.3 16.1 19.6 25.3
ROA (pretax %) (11.9) 23.3 33.9 42.7 59.5
Growth (%)
Revenue 66.9 57.1 32.8 34.1 32.1
EBITDA na na 99.5 60.8 73.8
EBIT na na 114.1 64.9 76.9
Normalised EPS na na 60.8 26.2 62.8
Normalised FDEPS na na 61.1 30.5 62.8
Per share
Reported EPS (US$) (0.00) 0.03 0.04 0.06 0.10
Norm EPS (US$) (0.03) 0.03 0.05 0.06 0.10
Fully diluted norm EPS (US$) (0.03) 0.03 0.04 0.05 0.09
DPS (US$) - - - - -

Cashflow (US$mn)
Year-end 31 Mar FY09 FY10 FY11F FY12F FY13F
EBITDA (20) 24 48 77 133
Change in working capital (3) (8) (9) (17) (11)
Other operating cashflow 33 (3) (4) (17) (26)
Free cashflow 6 11 33 41 94
Reduction in investments 3 0 - - -
Net acquisitions - - - - -
Addition in other LT liabilities - - - - -
Adjustments (1) (0) (7) - -
Cash dividends - - - - -
Equity issue 0 1 157 - -
Debt issue - - - - -
Convertible debt issue (0) (45) 4 (0) (33)
Others (3) 33 - - -
Cashflow from financial acts (3) (11) 161 (0) (33)
Net cashflow 6 0 187 41 61
Beginning cash 54 60 60 247 288
Ending cash 60 61 247 288 349
Ending net debt (13) (31) (214) (255) (349)

As at 31 Mar FY09 FY10 FY11F FY12F FY13F
Marketable securities - - - - -
Inventories 13 18 22 29 34
Total current assets 98 111 313 369 444
LT investments 0 - - - -
Fixed assets 10 10 11 11 10
Goodwill 11 12 17 17 17
Other LT assets 78 94 109 130 153
Total assets 198 228 452 528 624
Short-term debt 47 0 - - -
Long-term debt - 29 33 33 -
Total liabilities 95 83 92 91 60
Minority interest - - - - -
Common stock 160 162 339 339 339
Retained earnings (77) (45) (4) 73 200
Other equity and reserves 21 28 25 25 25
Total shareholders' equity 104 145 359 437 564
Total equity & liabilities 198 228 452 528 624
Liquidity (x)
Current ratio 1.06 2.17 5.51 6.69 7.69
Interest cover (8.4) 5.5 9.4 18.9 128.0
Leverage
Net debt/EBITDA (x) na net cash net cash net cash net cash
Activity (days)
Days receivable 67.5 70.1 71.9 67.7 60.4
Days inventory 159.4 180.6 204.6 212.5 237.3
Days payable 36.4 26.0 25.7 25.4 26.8
Cash cycle 190.4 224.7 250.9 254.8 270.8

Fraser and Neave F N N S P
C O N G L O M E R AT E S | S I N G AP O R E Maintained
Jit Soon Lim, CFA +65 6433 6969 jitsoon.lim@nomura.com

BUY

Following a 7.5% YTD pullback (3% decline for STI), F&N’s valuation looks Price target S$7.60
(set on 28 Mar 11)
attractive at 1.2x P/B and a 22% discount to our new SOTP-based PT of S$7.60.
Despite rising material costs, the strong performance from soft drinks and
breweries has cushioned margin pressure at its dairies division. The change in
accounting for the Australian properties to the completion method resulted in 2% FY12F net profit (S$mn) 612
and 10% cuts to FY11F and FY12F EPS, respectively but an 11% lift in FY13F Difference from consensus -13.9%
(revised on 28 March 2011). Reiterating BUY. Source: Nomura
 Catalysts
Nomura vs consensus
The advent of Kirin Holdings as a shareholder and a potential business partner
could result in more product launches, leveraging the channels of both companies. FY12F profit is below consensus,
likely due to our recognition of the
Anchor themes
change in accounting rules for
F&N is growing its F&B business to be as large as its property business via organic Australia; PT is above, as we
growth and M&A. The group could eventually demerge its property and F&B recognise the value of F&N’s growing
activities. F&B franchise.

Managing costs well 30 Sep (S$mn) FY10 FY11F FY12F FY13F
Revenue 5,697 5,972 6,226 7,852
Reported net profit 660 694 612 856
 Soft drinks and breweries see strong momentum Normalised net profit 583 592 612 856
Normalised EPS (S$) 0.42 0.43 0. 44 0.61
The group’s soft drink and brewery divisions continue to see solid
Norm. EPS growt h (% ) 62.7 1.7 3.3 39.9
momentum, underpinned by volume gains. We believe rising material Norm. P/E (x) 14.2 13.9 13.5 9.7
costs have been cushioned by manufacturing efficiencies and strong EV/EBITD A (x) 9.3 9.0 8.2 6.0
volume growth. Price/ book (x) 1.3 1.2 1.2 1.1
Dividend yield (%) 2.9 2.9 2.9 2.9
ROE (%) 10.7 10.5 8.8 11.3
 Dairies hit by higher raw materials Net debt /equity (% ) 46.8 37.6 29.7 19.6
Rising milk powder prices have had a negative impact on the group’s Earnings r evisions
dairy margins, resulting in a 28% decline in 1Q operating profit for the Change from previous (% ) - - -
unit. However, F&N has put through price increases to claw back Previous norm. EPS (S$) 0.43 0. 44 0.61
margins in 2H. Sou rce: Comp any, Nom ura estim ates
 Singapore property offers good visibility Share price relative to MSCISG

With many of its projects pre-sold, visibility for Singapore looks good, 7.3 130
although the level of profits may pull back on the high base achieved 6.8 125
120
6.3
last year. Due to an accounting change, profits from Australia will only 115
5.8 110
be recognised on completion. This has the effect of cutting our FY11F 5.3 105
100
and FY12F earnings forecasts by 2% and 10%, respectively, but lifting 4.8 95
our FY13F number by 11% (revised on 28 March 2011). 4.3 90
Mar10
May10
Jun10
Nov10
Dec10
Jan11
Feb11
Apr10
Jul10
Aug10
Sep10
Oct 10
 Group rationalisation continues 1m 3m 6m

The company’s brewery unit, APB, recently announced the sale of its Absolute (S$) 3.9 (8.9) (8.8)
Absolute (US$) 4.6 (6.9) (5.0)
21.5% Kingway Brewery stake in China to focus on the premium
Relative to Index 2.2 (4.4) (8.5)
segment. This, in our view, reflects ongoing rationalisation to focus on Mark et cap (U S$mn) 6,602
group strengths. Estimated free float (% ) 75.0
52-week range (S$) 6.80/ 4.55
 Attractive valuation 3-mth avg daily turnover (US$mn)

Stock borrowability
10.86
Easy
The stock is trading at a 22% discount to our SOTP-based PT of Major shareholders (% )
S$7.60 and at 1.2x FY11F P/B, with a dividend yield of 3%. Possible Kirin Holdings 15.0
Great Eastern Limited 10.0
catalysts for re-rating include: 1) divestment of Times Publishing; and Sou rce: Comp any, Nom ura estim ates
2) Kirin accumulating more shares.

Fraser and Neave Jit Soon Lim, CFA
Reiterate BUY
Attractive valuation, in our view

With the recent share price pullback, we believe F&N looks more attractive at 1.2x P/B
and a 22% discount to our SOTP-based PT of S$7.60.
Exhibit 52. F&N: 12M forward P/B Exhibit 53. F&N: price performance since Jan 2009
(S$/share) Kirin Holdings bought 14.7%

(S$)
9 stake at S$6.50/share
1.8x 8
8
1.6x 7
7
1.4x 6
6
1.2x
5 5
4 1.0x
0.8x 4
3
0.6x 3 Special dividend of 1Q11 results
2
2 RM1.1/share by F&N Bhd
1
0 1
7/1/1994
7/1/1995
7/1/1996
7/1/1997
7/1/1998
7/1/1999
7/1/2000
7/1/2001
7/1/2002
7/1/2003
7/1/2004
7/1/2005
7/1/2006
7/1/2007
7/1/2008
7/1/2009
7/1/2010
May-09
May-10
Mar-09
Nov-09
Mar-10
Nov-10
Mar-11
Jan-09
Feb-09
Apr-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Dec-09
Jan-10
Feb-10
Apr-10
Jun-10
Jul-10
Aug-10
Sep-10
Oct-10
Dec-10
Jan-11
Feb-11
Source: Bloomberg, Nomura research Source: Bloomberg, Nomura research
Exhibit 54. F&N: SOTP-based valuation

Stake Value
Listed companies (%) (S$mn) Remarks
F&N Malaysia (FNH MK) 57.3 1,351 Marked-to-market
Asia Pacific Breweries (APB SP) 39.7 2,343 Marked-to-market
Fung Choi Media (FUNG SP) 29.5 37 Marked-to-market
Frasers Centrepoint Trust (FCT SP) 42.7 478 Marked-to-market
China Dairy (CDG SP) 29.5 12 Marked-to-market
Vinamilk (VNM VN) 10.0 105 Marked-to-market
Frasers Commercial Trust (FCOT SP) 23.2 110 Marked-to-market
Valuation of listed investments 4,347
Unlisted assets
Times Publishing 310 5x FY11F EV/EBITDA
Myanmar Brewery 60 Book Value
FNN Foods Singapore 102 9x FY11F EV/EBITDA
Royalties for soft drinks/dairies brands 740 Capitalized at 10%
FCOT Convertible perpetual units 343 Following sale of Alexandra Technocentre to FCOT
AFS quoted investments 33 Book value
Property portfolio
Development properties 5,387 DCF of development profits
Investment properties (includes serviced residence) 2,024 Book value
Property held for development (Bedok/Changi) 137 Book value
REIT management business 96 3% of REIT assets managed
Adjusted net debt (2,447) Adjusted for net debt of APB and FNH
SOTP Valuation 11,222
Price Target (S$/share) 7.60 5% conglomerate discount to SOTP, rounded from 7.59
Risks to our price target:
 Changes to equity market risk premiums.
 Unexpected deterioration in the economic and physical real estate market outlooks.
 Movements in the value of its listed entities.

Year-end 30 Sep FY09 FY10 FY11F FY12F FY13F
Revenue 5,333 5,697 5,972 6,226 7,852
Gross profit 1,775 1,988 2,078 2,137 3,559
SG&A (990) (999) (1,115) (1,122) (2,185)
Employee share expense - - - - -
Operating profit 785 989 963 1,015 1,373
EBITDA 947 1,141 1,118 1,171 1,529

Depreciation (162) (152) (156) (156) (156)
EBIT 785 989 963 1,015 1,373
Earnings before tax 744 1,009 1,019 1,070 1,414
Income tax (173) (270) (234) (246) (325)
Net profit after tax 571 738 785 824 1,089
Other items (130) 86 - - -
Extraordinary items 1 77 102 - -
Reported NPAT 360 660 694 612 856
Dividends (188) (238) (238) (238) (238)

Reported P/E (x) 23.0 12.5 11.9 13.5 9.7
Dividend yield (%) 2.3 2.9 2.9 2.9 2.9
Price/cashflow (x) 7.0 19.9 11.5 10.2 10.2
Price/book (x) 1.5 1.3 1.2 1.2 1.1
EV/EBITDA (x) 12.5 9.3 9.0 8.2 6.0
EV/EBIT (x) 15.0 10.7 10.3 9.4 6.7
Gross margin (%) 33.3 34.9 34.8 34.3 45.3
EBITDA margin (%) 17.8 20.0 18.7 18.8 19.5
EBIT margin (%) 14.7 17.4 16.1 16.3 17.5
Net margin (%) 6.7 11.6 11.6 9.8 10.9
Dividend payout (%) 52.3 36.1 34.3 39.0 27.8
Capex to sales (%) 8.9 (1.4) 4.0 0.4 2.0
Capex to depreciation (x) 2.9 (0.5) 1.5 0.2 1.0
ROE (%) 6.4 10.7 10.5 8.8 11.3
ROA (pretax %) 6.4 8.8 8.8 9.1 11.9
We see profit growth
Growth (%) prospects underpinned by
Revenue 6.9 6.8 4.8 4.3 26.1 strong contribution from its
EBITDA 7.7 20.5 (2.0) 4.7 30.6 F&B activities and property
EBIT 7.6 26.0 (2.7) 5.4 35.3
Normalised EPS (15.7) 62.7 1.7 3.3 39.9
Per share
Reported EPS (S$) 0.26 0.47 0.50 0.44 0.61
Norm EPS (S$) 0.26 0.42 0.43 0.44 0.61
DPS (S$) 0.13 0.17 0.17 0.17 0.17

Cashflow (S$mn)
Year-end 30 Sep FY09 FY10 FY11F FY12F FY13F
EBITDA 947 1,141 1,118 1,171 1,529
Change in working capital 793 (494) (41) (134) (227)
Cashflow from operations 1,176 415 719 808 811
Capital expenditure (474) 79 (241) (24) (154)
Free cashflow 702 494 478 784 657
Reduction in investments (26) (720) (21) (44) (44)
Strong operating cashflow
Net acquisitions - - - - -
Reduction in other LT assets (353) 343 (0) - -
Addition in other LT liabilities (20) 48 5 2 3
Adjustments (303) (166) (461) (743) (617)
Cashflow after investing acts - - - - -
Cash dividends (66) (316) (238) (238) (238)
Equity issue 11 33 17 - -
Debt issue (134) (726) (390) (410) (583)
Others 799 1,066 610 648 821
Cashflow from financial acts 610 56 (1) 0 (0)
Net cashflow 610 56 (1) 0 (0)
Beginning cash 1,033 1,643 1,699 1,698 1,698
Ending cash 1,643 1,699 1,698 1,698 1,697
Ending net debt 3,658 2,876 2,487 2,077 1,494

As at 30 Sep FY09 FY10 FY11F FY12F FY13F
Accounts receivable 971 1,274 1,254 1,308 1,413
Inventories 4,431 4,701 4,891 4,931 5,152
LT investments 725 1,445 1,467 1,511 1,554
Fixed assets 4,854 3,284 3,331 3,331 3,331
Goodwill - - - - -
Other LT assets 542 199 199 199 199
Total assets 13,868 13,523 13,731 13,869 14,240
Short-term debt 1,693 1,909 1,217 807 223
Long-term debt 3,608 2,666 2,968 2,968 2,968
Minority interest 1,099 806 818 1,030 1,263
Common stock 1,342 1,375 1,391 1,391 1,391
Retained earnings - - - - -
Other equity and reserves 4,243 4,768 5,224 5,597 6,215
Liquidity (x)
Current ratio 2.13 2.13 2.58 3.05 3.86
Interest cover 11.8 15.9 21.5 20.5 20.8
Leverage
Net debt/EBITDA (x) 3.86 2.52 2.22 1.77 0.98
Net debt/equity (%) 65.5 46.8 37.6 29.7 19.6
Activity (days)
Days receivable 67.7 71.9 77.2 75.3 63.2
Days inventory 486.1 449.3 449.5 439.6 428.6
Days payable 137.8 144.2 142.9 142.7 142.6
Cash cycle 415.9 377.0 383.8 372.2 349.2

Venture Corp V M S S P
TE C H N O L O G Y / P C H AR D W AR E | S I N G AP O R E Maintained
NOMURA INTERNATIONAL (HK) LIMITED
TAIPEI BRANCH
Nitin Kumar +886 2 2176 9968 nitin.kumar@nomura.com
BUY
While the Japan earthquake has increased component supply constraints, as seen Price target S$11.50
(set o n 27 A pr 10)
in rising ASPs, we believe Venture is better positioned than peers given higher
Upside/dow nside 20.3%
inventory levels. With working capital improvements enabling a likely rise in FCF Difference from consensus -1.5%
yield from 2% in FY10 to 11% in FY11F, Venture’s higher dividends could be
sustained. Reiterate BUY on 1) attractive dividend yields and 2) better product mix. FY11F net profit (S$mn) 206.7
 Catalysts So urce: No mura
1) Expansion of FCF yields in FY11F, as company resumes focus on working
capital management after using cash to improve supply availability in 2010 and Nomura vs consensus
2) recovery in RSS/T&M sales continues.
We remain conservative on margin
Anchor themes expansion at Venture as it increases
Venture has expanded its ODM business from printing to networking, test/ its ODM and solutions product mix.
measurement and medical. This strategy provides greater support to margins than
pure EMS manufacturing.
Component constraints in 1H11F

31 Dec (S$mn) FY09 FY10 FY11F FY12F
Revenue 3,413 2,676 2,903 3,117
 Component supply constraints post Japan earthquake Reported net profit

Normalised net profit
143.3
162.2
188.3
191.3
206.7
206.7
226.8
226.8
The Japanese earthquake has resulted in supply disruptions in Normalised EPS (S$) 0.59 0.70 0.75 0.83
Norm. EPS growth (%) (42.4) 17.9 8.0 9.7
multiple segments which primarily impact semi-wafer supply, LCD Norm. P/E (x) 16.6 14.1 13.1 11.9
panel supply and key passives, eg, tantalum components. As such, EV/EBITDA (x) 10.6 9.8 8.5 7.5
component ASPs have started to increase — DRAM contract prices Price/book (x) 1.4 1.4 1.4 1.3
Dividend yield (%) 5.2 5.8 5.8 5.8
have risen 3~6% h-h in March, NAND flash ASPs are up 3~7% h-h. ROE (%) 7.6 10.1 10.9 11.6
Net debt/equity (%) net cash net cash net cash net cash
While Venture, at its earnings call in February, had noted a cautious Earnings revisions
outlook for 1Q11F, we believe component constraints could have Previous norm. net profit 191.3 206.5 226.3
Change from previous (%) - - -
marginally negative pressure on sales and margins. That said, we
Previous norm. EPS (S$) 0.70 0.75 0.83
believe, compared to its peers, Venture is better placed as it still held Source: Company, Nomura estimates
higher inventories of components exiting 4Q10. We maintain our

forecasts, with expectations for uptick in 2H11F from pent-up demand. Share price relative to MSCISG
 FCF yields should expand as working capital improves 10 120

115
10
At end-2010, Venture’s cash cycle days stood at 90-95 (typical: 70-80 110
9 105
days) as it had used cash to secure inventory of key components 100
9
amid shortages, which are now behind us. While we see this excess 95
inadvertently benefitting Venture amid current supply constraints, we 8 90
May10
Mar10
Apr10
Jun10
Jul10
Aug10
Sep10
Oct10
Nov10
Dec10
Jan11
Feb11
expect Venture to continue improving working capital management.

We forecast Venture’s FCF yields will rise from 2% in FY10 to 11%. 1m 3m 6m
This is sufficient to support 5.8% dividend yields on higher dividends, Absolute (S$) - 2.5 (2.6)
Absolute (US$) 0.7 4.8 1.4
in our view. Relative to Index (3.1) 5.9 (3.5)
 Reiterate BUY with PT maintained at S$11.50 Estimated free float (%) 54.1
52-week range (S$) 9.99/8.35
We see FY11/12F gross margins at 14% (+0.2pp y-y) and 14.1% 3-mth avg daily turnover (US$mn) 2.95
(+0.1pp y-y), respectively. We reiterate our BUY rating and see Stock borrowability Easy
Major shareholders (%)
catalysts from: 1) attractive dividend yield of 6% with FCF Aberdeen Asset Mgmt 21.1
improvements ahead and 2) improving product mix, enabling EBIT Fidelity Management 8.5
margin improvements. Source: Company, Nomura estimates

Venture Corp Nitin Kumar
Exhibit 55. Venture cash cycle days have room for improvements as inventories are worked down
(days) 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10
Payable 52 53 55 50 53 55 57 56 65 57 65 53
Inventory 66 66 73 62 73 53 51 53 87 88 91 77
Receivable 59 59 59 54 58 63 58 59 59 65 63 68
Cash cycle 73 73 78 66 78 61 52 55 81 95 90 92
Source: Company data, Nomura Singapore
Exhibit 56. Valuation comparison

Price P/E (x) P/BV (x) Goodwill as Adjusted P/BV* Adjusted ROE (%)*
Blbg code Rating 30-Mar-11 FY11F FY12F FY11F FY12F % of equity FY11F FY12F FY11F FY12F
Venture VMS SP BUY 9.56 12.7 11.6 1.4 1.3 35.3 2.0 1.9 16.0 16.7
Celestica CLS US Not rated 10.82 10.1 9.0 1.4 1.3 0.8 1.5 1.3 15.2 14.1
Flextronics FLEX US Not rated 7.61 7.4 6.8 2.0 1.5 0.0 2.0 1.5 26.5 22.1
Jabil Circuits JBL US Not rated 21.19 9.6 8.5 2.3 1.9 1.7 2.4 1.9 24.8 22.9
Hon Hai Precision 2317 TT NEUTRAL 104.50 11.6 10.0 1.9 1.7 0.0 1.9 1.7 16.7 17.0
Plexus PLXS US Not rated 35.11 15.8 12.9 1.9 1.7 0.0 1.9 1.7 12.3 13.3
Sanmina SANM US Not rated 10.96 5.9 4.7 1.1 0.9 0.0 1.1 0.9 19.6 19.9
Average 1.8
Note: Venture and Hon Hai Precision are Nomura estimates; all other companies are Bloomberg consensus estimates.
* Adjusted for goodwill.
Source: Company data, Bloomberg, Nomura Singapore estimates
Valuation methodology. Our PT of S$11.50 is derived from a peer-average FY11F

P/BV of adjusted for goodwill to which we add FY11F cash per share of S$1.60 and
announced dividend of S$0.55.
Downside risks to our PT include: 1) Sharp appreciation of the Singapore dollar,

which may result in an incremental increase in operating expenses (note: both COGS
and sales are US dollar denominated); 2) slower-than-expected growth from new
higher margins businesses for Venture resulting in slower margin expansion and
3) broader slowdown in capex spending if macro concerns expand.

Incom e statem ent (S$m n)
Revenue 3,784 3,413 2,676 2,903 3,117
Gross profit 469 325 368 405 439 FY11F sales to grow 8.5% y-y
SG&A (193) (170) (178) (193) (208) after the 21.6% y-y decline in
Employee share expense 2010 as Venture exited the
Operating profit 277 155 190 212 232 low-margin printing business
EBITDA 337 215 243 267 288

Depreciation (41) (41) (35) (36) (38)
Amortisation (20) (19) (18) (19) (19)
EBIT 277 155 190 212 232
Associates & JCEs 0 (1) 1 - -
Income tax (5) 3 (2) (9) (9)
Minority interests (1) (0) - - -
Other items
Preferred dividends
Norm alised NPAT 282 162 191 207 227
Extraordinary items (115) (19) (3) - -
Reported NPAT 167 143 188 207 227
Dividends (137) (137) (151) (151) (151)

FD normalised P/E (x) 9.5 16.6 14.1 13.1 11.9 Dividend yield expands to 6%
FD normalised P/E at price target (x) 11.5 20.0 17.0 15.7 14.3 as management raises
Reported P/E (x) 15.7 18.3 13.9 12.7 11.6 dividends by 10%
Dividend yield (%) 5.2 5.2 5.8 5.8 5.8
Price/cashflow (x) 7.1 8.1 38.6 8.7 9.3
Price/book (x) 1.4 1.4 1.4 1.4 1.3
EV/EBITDA (x) 7.2 10.6 9.8 8.5 7.5
EV/EBIT (x) 8.8 14.7 12.4 10.7 9.3
Gross margin (%) 12.4 9.5 13.8 14.0 14.1
EBITDA margin (%) 8.9 6.3 9.1 9.2 9.3
EBIT margin (%) 7.3 4.6 7.1 7.3 7.4
Net margin (%) 4.4 4.2 7.0 7.1 7.3
Effective tax rate (%) 1.8 (1.7) 1.1 4.0 4.0
Dividend payout (%) 82.3 95.7 80.1 73.0 66.5
Capex to sales (%) 0.9 0.5 1.0 0.9 0.8
Margins to expand further as
ROE (%) 8.8 7.6 10.1 10.9 11.6 product mix improvements
ROA (pretax %) 11.2 6.8 9.0 10.2 11.3 continue
Grow th (%)
Revenue (2.3) (9.8) (21.6) 8.5 7.4
EBITDA (1.5) (36.3) 12.8 10.1 8.0
EBIT (0.1) (43.8) 22.4 11.3 9.3
Normalised EPS (0.9) (42.4) 17.9 8.0 9.7
Normalised FDEPS (2.4) (42.6) 17.8 8.0 9.7
Per share
Reported EPS (S$) 0.61 0.52 0.69 0.75 0.83
Norm EPS (S$) 1.03 0.59 0.70 0.75 0.83
DPS (S$) 0.50 0.50 0.55 0.55 0.55

Cashflow (S$mn)
EBITDA 337 215 243 267 288
Change in working capital 46 118 (111) (4) (6)
Free cashflow 337 309 42 230 252
Reduction in investments 164 (62) (17) - -
Net acquisitions (26) - - - -
Reduction in other LT assets (1) 96 (0) - -
Addition in other LT liabilities (20) (4) (4) 1 1
Adjustments (111) (30) 22 (1) (1)
Cash dividends (137) (137) (137) (151) (151)
Equity issue - - 11 - -
Debt issue (189) (102) (24) 1 1
Others 4 (15) (17) - -
Cashflow from financial acts (323) (255) (168) (150) (150)
Net cashflow 20 53 (125) 80 102
Beginning cash 493 514 567 442 522
Ending cash 514 567 442 522 623
Ending net debt (192) (343) (238) (318) (420)

As at 31 Dec FY08 FY09 FY10 FY11F FY12F
Inventories 539 476 513 513 513
LT investments 43 105 122 122 122
Fixed assets 196 165 145 147 136
Goodwill 642 642 641 624 607
Other LT assets 114 18 18 18 18
Total assets 2,916 2,744 2,545 2,653 2,766
Short-term debt 202 224 83 83 83
Long-term debt 120 - 120 120 120
Convertible debt
Total liabilities 1,017 879 688 729 767
Preferred stock
Common stock 672 672 672 672 672
Proposed dividends
Other equity and reserves (119) (159) (220) (220) (220)
Liquidity (x)
Current ratio 2.05 1.97 2.74 2.77 2.84
Leverage
Activity (days)
Days receivable 55.9 60.2 75.9 68.7 69.2
Days inventory 60.0 60.0 78.2 75.0 70.2
Days payable 50.2 55.9 68.2 53.7 54.1
Cash cycle 65.7 64.3 85.9 90.0 85.3




Other Team Members:
Tushar Mohata (Associate) — All enquiries arising from this note should be directed to Jit Soon Lim.
Any Authors named on this report are Research Analysts unless otherwise indicated
Analyst Certification
We, Jit Soon Lim, Yuan-Yiu Tsai, Lisa Lee, Anand Pathmakanthan, Tanuj Shori, Ken Arieff Wong, Tushar Mohata, Andrew Kam Wing Lee and
Cecilia Chan, hereby certify (1) that the views expressed in this Research report accurately reflect our personal views about any or all of the
subject securities or issuers referred to in this Research report, (2) no part of our compensation was, is or will be directly or indirectly related to
the specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment
banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
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48% have been assigned a Buy rating which, for purposes of mandatory disclosures, are classified as a Buy rating; 38% of companies with this
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As at 31 December 2010.
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The rating system is a relative system indicating expected performance against a specific benchmark identified for each individual stock.
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STOCKS
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A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next 12 months.
A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next 12 months.
Benchmarks are as follows: United States: S&P 500; Europe: Dow Jones STOXX 600; Global Emerging Markets (ex-Asia): MSCI Emerging
Markets ex-Asia.

Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published from
30 October 2008 and in Japan from 6 January 2009
STOCKS
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Target Price - Current Price) / Current Price,
subject to limited management discretion. In most cases, the Target Price will equal the analyst's 12-month intrinsic valuation of the stock,
based on an appropriate valuation methodology such as discounted cash flow, multiple analysis, etc.
A 'Buy' recommendation indicates that potential upside is 15% or more.
A 'Neutral' recommendation indicates that potential upside is less than 15% or downside is less than 5%.
A 'Reduce' recommendation indicates that potential downside is 5% or more.
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SECTORS
A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive
absolute recommendation.
A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral
A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative
Explanation of Nomura's equity research rating system in Japan published prior to 6 January 2009 (and ratings in
Europe, Middle East and Africa, US and Latin America published prior to 27 October 2008)
STOCKS
A rating of '1' or 'Strong buy', indicates that the analyst expects the stock to outperform the Benchmark by 15% or more over the next six
months.
A rating of '2' or 'Buy', indicates that the analyst expects the stock to outperform the Benchmark by 5% or more but less than 15% over the next
six months.
A rating of '3' or 'Neutral', indicates that the analyst expects the stock to either outperform or underperform the Benchmark by less than 5% over
the next six months.
A rating of '4' or 'Reduce', indicates that the analyst expects the stock to underperform the Benchmark by 5% or more but less than 15% over
the next six months.
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SECTORS
A 'Bullish' stance, indicates that the analyst expects the sector to outperform the Benchmark during the next six months.
A 'Neutral' stance, indicates that the analyst expects the sector to perform in line with the Benchmark during the next six months.
A 'Bearish' stance, indicates that the analyst expects the sector to underperform the Benchmark during the next six months.
Benchmarks are as follows: Japan: TOPIX; United States: S&P 500, MSCI World Technology Hardware & Equipment; Europe, by sector -
Hardware/Semiconductors: FTSE W Europe IT Hardware; Telecoms: FTSE W Europe Business Services; Business Services: FTSE W Europe;
Auto & Components: FTSE W Europe Auto & Parts; Communications equipment: FTSE W Europe IT Hardware; Ecology Focus: Bloomberg
World Energy Alternate Sources; Global Emerging Markets: MSCI Emerging Markets ex-Asia.
Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior
to 30 October 2008
STOCKS
Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price,
subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of
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horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside
implied by the recommendation.
A 'Strong buy' recommendation indicates that upside is more than 20%.
A 'Buy' recommendation indicates that upside is between 10% and 20%.
A 'Neutral' recommendation indicates that upside or downside is less than 10%.
A 'Reduce' recommendation indicates that downside is between 10% and 20%.
A 'Sell' recommendation indicates that downside is more than 20%.
SECTORS
A 'Bullish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a positive
A 'Neutral' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a neutral
A 'Bearish' rating means most stocks in the sector have (or the weighted average recommendation of the stocks under coverage is) a negative

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Strategy | S I N G A P O R E

NOMURA SINGAPORE LIMITED

Jit Soon Lim, CFA +65 6433 6969 jitsoon.lim@nomura.com TOP

 Action Stocks for action

Springing back Analysts

 Offshore sees strong orders; upstream valuations look attractive

 Bank EPS growth underpinned by loan growth

 Still bullish on office, and cautious on residential

 Margin pressures something to monitor

Nomura 1 4 April 2011

Latest company views

Nomura 2 4 April 2011

Singapore strategy: 2Q11

Exhibit 1. Industrial output ex-biomed Exhibit 2. PMI – Singapore vs US

(S$bn) Singapore total loans y-y% (%) (%) (%)

Source: CEIC Source: Thomson Reuters Datastream, Nomura research

Nomura 3 4 April 2011

On balance, we believe that the micro- and macro-economic fundamentals are

(x) P/B (LHS) (%) (x) 12mth fwd P/E(x)

Source: Nomura research Source: Nomura research

Nomura 4 4 April 2011

Exhibit 7. Summary of sector views – Nomura coverage

Nomura 5 4 April 2011

Exhibit 8. Top picks for the Singapore market

Nomura 6 4 April 2011

Exhibit 9. Outperformers in 1Q11 Exhibit 10. Underperformers in 1Q11

(%) STI Banks (%) Property Commodities

Source: Bloomberg, Nomura research Source: Bloomberg, Nomura research

1. What is the impact of the recent earthquake in Japan on Singapore?

 Disruption in supply impacting companies relying on components from Japan and

Nomura 7 4 April 2011

From a company-specific perspective, we highlight in the next Exhibit but one

Nomura 8 4 April 2011

to the company’s official announcement on 14 March. Noble is a potential beneficiary

Source: Nomura research

Exhibit 16. Singapore corporate – Japan exposure

Nomura 9 4 April 2011

2. What is the impact of recent policy measures on corporate

Exhibit 17. Impact of stronger S$ vs US$ on Singapore companies

Nomura 10 4 April 2011

3. What is the outlook for Singapore corporate earnings, and are

30 Earnings Revision (%) 2011F EPS Growth

Nomura 11 4 April 2011

Exhibit 21. SGD/USD performance since 2009

Exhibit 22. Market valuation – Nomura coverage

Valuations appear undemanding

Nomura 12 4 April 2011

(x) P/B (LHS) (%) (x) 12mth fwd P/E(x)

Regional valuation comparison

From a regional perspective, we believe Singapore’s valuation on P/B looks attractive,

Exhibit 25. Regional consensus valuation

Nomura 13 4 April 2011

Exhibit 26. Singapore market – total returns for US$-based investors

Source: Bloomberg, Nomura research

We looked at recent history to understand the effect of inflation on stock market

(%) (Price/share) (%) (Price/share)

Source: Nomura research Source: Nomura research

Nomura 14 4 April 2011

Exhibit 29. CPI vs commodities Exhibit 30. CPI vs telcos

Exhibit 31. CPI vs property Exhibit 32. CPI vs transport