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Whatscooking
SingaporeHealthcare:Arecapofunderlyingdrivers HealthcarestocksinAsiatypicallytradeatpremium valuations. Other than the defensive nature of the sector, the appeal lies in the demographic and structural drivers which point to an increasing demandforqualityhealthcareservicesoverthelong term.Webelievethatprivatehealthcareoperatorsin Singaporewouldcontinuetoenjoyrobustgrowthas we review the underlying drivers and factors that supportsuchagrowthanditspremiumvaluation. yeakcheekeong@kimeng.com

Todays marketforecast
RAINY
Last:2,789.35(66.42) High:2,820 Low:2,732

2November2011

STITECHNICALS
Market direction is still upward, with resistance at 2,800 on the upside and supported at 2,700 on the downside. But bulls ought to take note that momentum indicators are approaching overbought and could turn downward if poor newsflowemerges.

Hotstock
Lonza Group Ltd (LONZ SP/LONN VX, S$79.97/ CHF58.6, NOT RATED) Lonza is a leading Swiss contract manufacturer to the pharmaceutical, healthcareandlifesciencesindustries.Thecompany recently secondarylisted on the SGX by way of introduction as it looks towards Asia as a strategic region for future growth. Despite a 28% YoY decline in 1H11 net profit, it expects its underlying order pipelinetocontinuetospurgrowthinsalesandEBIT for FY11. The stock currently trades at FY12 consensusPERof10.5x. yeakcheekeong@kimeng.com

Overnightmarketsnapshots
DowJones Nasdaq FTSE100 CAC40 DAXIndex

11,657.96 2,606.96 5,421.57 3,068.33 5,834.51

297.1 77.5 122.7 174.5 306.8

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Kim Eng Research Portal: This is part of our efforts to better engage YOU, our valued client. Everything is just a click away. Get actionable trading ideas each day. Its even iPhone friendly. Freepublicaccessfornow,somarkdownthissite and share the joy with your friends! www.kimengresearch.com.sg
TheRealDealswebcast Ins & Outs of Commercial Property Investment Speaker:OoiYiTung In yet another educational session, our property analyst Ooi Yi Tung shares his views on the retail property scene and sheds light on the valuation methodsusedbytheindustry. Watch the video presentation of the hourlong talk (sixpartsinall)attendedbymorethan500property agentson7October2011.

Topnewsinbitesizedpieces
OVERNIGHT Dow Jones ended sharply lower last night followingGreekPrimeMinisterGeorgePapandreous announcementthathewillputGreecesbailouttoa referendum.ThisraisesrealfearsofaGreekdefault. LOCAL Singapores productivity gains best among 19 economies. A study by the US Department of Labor has shown that Singapores push for higher productivity is starting to pay off. The Republics manufacturing output per manhour last year made thebiggestjumpamong19majoreconomies.
Co.RegNo:198700034E MICA(P):090/11/2009

SEEAPPENDIXIFORIMPORTANTDISCLOSURESANDANALYSTCERTIFICATIONS

WHATSCOOKING

SingaporeHealthcare
Analyst:YeakCheeKeong6564325730yeakcheekeong@kimeng.com

Event
Healthcare stocks in Asia typically trade at premium valuations. Other than the defensive nature of the sector, the appeal lies in the demographic and structural drivers which point to an increasing demandforqualityhealthcareservicesoverthelong term.Webelievethatprivatehealthcareoperatorsin Singaporewouldcontinuetoenjoyrobustgrowthas we review the underlying drivers and factors that supportsuchagrowthanditspremiumvaluation.

OurView
Scarcitycommandsapremium Since the delisting of Parkway Holdings (Parkway) and Thomson Medical Centre (TMC) in 201011, the onlyreasonablysizedhospitalstockthatisstilllisted ontheSGXisRafflesMedicalGroup(RMG).Thestock therefore commands a scarcity premium, even though it also offers highquality earnings. Likewise, regional healthcare operator stocks are trading at suchpremiumlevels. Thebenchmarkhasbeenset ParkwayandTMCwereprivatisedatabout31xFY10 PER,settingabenchmarkforvaluationinthesector. Parkwayislookingtorelistinthenext13yearsasan enlarged entity under its parent, Integrated Healthcare, combining the assets of Singapores Parkway and Malaysias Pantai Holdings with 16 hospitals throughout Asia. We believe that the relisting may happen as early as next year and this would ignite interest in the sector and reinforce valuations. PeerComparison
Company RafflesMedicalGroup HealthwayMedicalCorp ApolloHospitalsEnterprise FortisHealthcareIndia BangkokDusitMedicalServices BumrungradHospital KPJHealthcare Average
Source:Bloomberg

Demographictrendsandrisingaffluence Singapores population stood at 5.18m as at June 2011 and this could reach about 6m in eight years, assuminganannualgrowthrateof2%.Aswithmany developed countries, it faces an ageing population due to declining birth rate. At the same time, the population has been growing from an influx of foreigners who are not eligible for healthcare subsidies, thus creating opportunities for private operators.Risingaffluencealsodrivestheabilityand willingness to opt for private healthcare over public healthcare, auguring well for the private sector to gainmarketshare. Medicaltourismbuzz Singapore is also wellestablished as a medical hub, attracting medical travellers to seek highquality services with Indonesians forming the majority. According to the Singapore Tourism Board, tourism receipts on medical expenses grew by $208m last yeartoreach$940m.

SGD SGD Rs Rs Bt Bt RM

Mktcap (b) 1.2 0.2 69.0 52.0 104.7 29.0 2.5

Price (lcl) 2.23 0.08 525.50 128.30 67.75 39.75 4.23 Hist 24.1 47.5 35.4 39.7 26.2 19.6 19.2 30.2

PER(x) Curr 23.5 28.7 25.4 20.3 18.9 23.3 Fwd 20.8 25.0 21.9 18.8 15.4 20.4

P/S (x) 4.5 1.9 2.5 3.3 3.1 2.7 1.3 2.8

P/B (x) 3.8 0.8 3.5 1.6 3.6 4.6 3.0 3.0

ROE (%) 16.9 1.7 10.4 4.8 15.4 21.8 17.0 12.6

NPM (%) 18.9 3.3 7.1 8.4 9.7 12.8 7.2 9.6

NetD/E (%) 1.2 0.2 69.0 52.0 104.7 29.0 2.5

Yld (%) 1.6 0.0 0.7 0.0 1.2 2.4 3.2 1.3

HOTSTOCK

LonzaGroupLtd
Analyst:YEAKCheeKeong6564335730yeakcheekeong@kimeng.com

Uptodatein60seconds
Background: Lonza Group Ltd is a leading contract manufacturing supplier to the pharmaceutical, healthcare and life sciences industries. Based in Switzerland, its products span from research to final product manufacturing. Its four key business divisions are life science ingredients, microbial control, custommanufacturingandbioscience.

Ourview

Many challenges ahead. Lonza operates 27 productionandR&Dfacilitiesglobally.Giventhe complex nature of the business, the barrier to entryishigh.However,itfaceschallengesfrom a strong Swiss franc, higher raw material cost and increasing volatility in the pharmaceutical markets, especially for contract manufacturing. It seeks to capture new business opportunities Recent development: Lonza was secondary in BRICS and move towards the downstream listed by way of introduction on the SGX on valuechain. 21Octoberthisyear.Itsprimarylistingisonthe FuturegrowthandsustainabilityinAsia.Asia SIXSwissExchangeanddatesbacktoNovember offers both an opportunity for growth and cost 1999. The rationale for the SGX listing is to advantages. Lonza is investing in several new broaden its investor base in Asia and open up plantsinSingaporeandChinaoverthenexttwo options for capitalraising as Asia emerges as a years. Management expects sales in Asia to growat1420%pathroughto2015,supporting strategicimportantregionforfuturegrowth. 510%growthinthegroupsoverallsales. Keyratios Buildingleadershipinmicrobialcontrol.Lonza Pricetoearnings:10.5x. PricetoNTA:2.9x completed the acquisition of US firm Arch Dividendpershare/yield:CHF2.15/3.7% Chemicals on 21 October this year, which Netcash/(debt)pershare:(CHF24.5) expanded its microbial control business. The Netgearing:60.5% acquisition allows it to emerge as a leading Source:Company,Bloomberg microbial control player and to balance the Everythingelse volatility in its custom manufacturing business. Shareprice(CHF) 58.6 Combined 2010 sales for this business would Issuedshares(m) 52.92 havebeenUS$1.6bonaproformabasis.

Marketcap(CHFm) Freefloat(%) Recentfundraising activities FinancialYE Major shareholders YTDchange 52wkpricerange

3,101.12 72% Nil 31Dec

Manning&NapierAdvisers(10.00%); FranklinResources(9.95%)

19.42% CHF44.3084.66

Order pipeline supports underlying growth. Though 1H11 net profit declined by 28% YoY, management expects underlying sales and EBIT growth for 2011 to be supported by its current order pipeline. Based on Bloomberg consensus estimates, the stock currently trades at 10.5x FY12PER.

Source:Company,Bloomberg

SummaryFinancials YearEndDec31
Revenue(CHFm) Grossprofit(CHFm) Netprofit(CHFm) EPS(CHF) EPSgrowth(%) PER(x)

2008
2,937 839 419 8.8 39.2 6.7

2009
2,690 545 159 3.2 63.8 18.4

2010
2,680 711 284 5.6 74.0 10.6

1H10
1,301 356.0 135.0 2.6 n.a. n.a.

1H11
1,193 319.0 97.0 1.9 n.a. n.a.

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2November2011

ResultsCalendar
MONDAY 31Oct11 Company Fra s ers Centrepoi nt Trus t Grea tEa s tern Trea s uryChi na Trus t Tua nSi ng Hol di ngs Uni ted Overs ea s Ins ura nce Period FY11 TUESDAY 01Nov11 Company Merca torLi nes Os i m Interna ti ona l Period 2Q WEDNESDAY 02Nov11 Company Bi os ens ors Interna ti ona l Broa dwa y Indus tri a l Group Cos co DBSGroup Hi P Interna ti ona l Si no Gra ndnes s UOB Period 2Q THURSDAY 03Nov11 Company Chi na Merchants Ci tySpri ng Infra s tructure Li ppoMa l l s Indones i a Reta i l Trus t LMA Internati ona l OCBC Pa rkwa yLi fe REIT Sembcorp Ma ri ne Si nga pore Ai rl i nes 10Nov11 Company ASLMa ri ne Chi na Avi a ti on Oi l Ci ty Devel opments CSEGl oba l DMX Technol ogi es Genti ng Si nga pore Gl oba l Logi s ti c Properti es Ma cqua ri e Internati ona l Infra s tructure Fund Petra Foods Qi ngmei Group Sa i zenREIT SATS ShengSi ong Group Si ngTel Stra coCorp SuperGroup Worl d Preci s i on Ma chi nery Period 3Q FRIDAY 04Nov11 Company HTL Interna ti ona l Sembcorp Indus tri es STEngi neeri ng Period 3Q

3Q

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3Q 3Q 3Q 3Q 3Q

3Q 3Q 3Q 3Q 3Q 2Q

3Q

07Nov11 Company Period DAYAFTERHARIRAYA HAJI

08Nov11 Company Chi na Suns i ne Chemi ca l Del Monte KreuzHol di ngs Period 3Q 3Q 3Q

09Nov11 Company ARAAs s et Ma na gement Bes tWorl d Interna ti ona l Hi a pHoe HoBee Inves tments Hotel Roya l Nobl eGroup QAF Period 3Q 3Q 3Q 3Q 3Q 3Q 3Q

11Nov11 Period 1Q 3Q 3Q 3Q 3Q 3Q 2Q Company Brea dta l k El l i ps i z Gol denAgri Res ources IFSCa pi ta l Mewa h Interna ti ona l OttoMa ri ne Pa nPaci fi c Hotel s Perenni a l Chi na Retai l Trus t SBSTra ns i t Si nga pore Rei ns ura nce SMBUni ted UOLGroup WBL Corpora ti on Period 3Q 1Q 3Q 3Q 3Q 3Q 3Q

Sta rHub SuperBowl Hol di ngs Wi l ma r Interna ti ona l Xi nRen Al umi num

3Q

3Q

3Q

3Q 3Q 3Q

3Q 1Q 1Q 2Q 3Q 2Q 3Q 3Q 3Q

3Q 3Q 3Q 3Q FY11

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