Singapore Petroleum Cheapest valuations - highest dividend yield

Story: SPC share price has tumbled 23% YTD, sharply underperforming the
FSSTI's 12% decline. The falling share price was partly due to the broad
market selldown but mainly reflecting investors' concern about the current
soft refining margin.

Point: We remain positive on the refining industry outlook. Although
current refining margin (Reuters' Singapore complex refining margin) of
US$4-5/bbl is significantly below US$7.6/bbl averaged in 2007, this is just
the volatile nature of the industry. We expect the margin to resume to
US$6-8/bbl over the next few months as oil traders start to build up
inventory for the summer driving season. We expect refining margin to
average US$7.2/bbl in 2008, softening slightly from US$7.6/bbl in 2007.

Relevance: At current price, SPC's 6.1x 2008 PE is the cheapest among
regional peers and its 8.2% dividend yield for 2008 is the highest. The
counter is at 34% below last year's peak. Although it has recovered 9%
during the past few days, SPC share still offers 24% upside to our revised
target price of S$7.27 (sum-of-parts). We upgrade our recommendation from
Fully Valued to Buy.