Broker's Digest 19 Mar 2018

City Developments (March 13: $13.52)

- Maintain Buy.  City Developments is the developer with the largest amount of unsold inventory on the books

- The strong pre-sales of the upcoming launch - The Tapestry - will be a catalyst for further re-rating.

- Price target of $15.40, based on a parity to revised net asset value (RNAV), which implies 1.2x P/NAV

Dairy Farm Int'l Holdings (March 13: US$8)

- Downgrade to Hold.  CY2017 sales grew by a merger 0.8%, while core earnings before interest and taxes narrowed by 3.9% y-o-y

- The main culprits for the lower revenue and Ebit were the Southeast Asia supermarket and hypermarket businesses.

- We cut our FY2018/FY2019F EPS by 5.9%.0.8% to reflect slower sales growth and lower margins.  We also introduce our FY2020F forecasts.

- A lower price target of US$8.40 (from US$9.18) on a lower PER of 21x (from 23.7x)

Jubilee Industries Holdings (March 13: 4.2 cents)

- Add (initiating coverage).  Jubilee is set to swing back into full-year positive net profit after two years of net losses post-restructuring, based on our estimates.

-Overall gross margin improved to 6.4% in 1HFY2018 from 4% in 2HFY2017 as a result of leaner manufacturing and better product mix with higher margin and commission

- Our price target of 5.1 cents is derived from sum-of-the-parts valuation

Netlink NBN Trust (March 13: 82 cents)

- Buy (initiating coverage).  With the increasing usage of fibre broadband services for day-to-day activities, driven by growing demand for connectivity and rapid broad-based growth in data consumption, we believe NLT BNN has a resilient business model

- All considered, given its stable earnings outlook coupled with policy to distribute 100% of its cash available for distribution, we value NLT NBN based on a dividend discount model.  Fair value estimate of 91 cents

Keppel Corp (March 13: $7.90)

- Buy.  Following the letter of intent signed at end-February, Keppel has firmed up the contract with Awilco worth US$425 million

- The contract accounts for 19% of our order win assumption of $3 billion this year.

- Price target of $10.20.  Keppel is a safer bet to ride on both offshore and marine recovery and property re-rating while offering a decent dividend yield of 3%

Mermaid Maritime (March 13: 14.8 cents)

- Maintain Hold.  Mermaid's order book has declined q-o-q to about US$148 million as of 4Q2017.

- Overall we think Mermaid's risk reward trade-off is neutral at this point: the lacklustre near-term outlook and downside risks are offset by undemanding valuation levels

- We based our valuation of Mermaid's core subsea business on a P/BV peg of 0.6x and ascribe zero value to associate AOD, giving us a price target of 14 cents.

Perennial Real Estate Holdings (March 13: 87.5 cents)

- Maintain Add.  PREH announced that it will purchase the remaining 50% stake in The Capitol Singapore from Chesham Properties.

- We view the deal positively as it signals the resolution of the deadlock on the project and progress  can now be made to unlock value and returns from this iconic development.

- Our RNAV estimate is raised by 5% to $1.97 as the acquisition cost is below the current market replacement cost.  Our FY2019-FY2020F EPS is raised by 2% to 18% to factor in the additional income post-consolidation and better asset performance

- A slightly higher price target of $1.18 pegged to a 40% discount to RNAV

Raffles Medical Group (March 13: $1.19)

- Maintain Buy.  We forecast RMG's net profits to decline gradually and are expected to trough in 2019 upon the opening of its Shanghai hospital.  Thereafter, we expect a gradual recovery and the utilisation of its new hospitals in Chongqing and Shanghai to rise after their opening in 4Q2018 and 2H2019 respectively

-For investors with a longer-term horizon, RMG's relative underperformance over the past year is an accumulation opportunity.  DCF-based price target of $1.32

Singapore Tech Engineering (March 13: $3.51)

- Upgrade to Buy. After three lacklustre years owing to tough market conditions and restructuring costs, growth catalysts are falling in place.

- We adjusted FY2018/FY2019/FY2020F profit by 5%.+7%/+14% and raised our DCF-based price target by 31% to $4.15 from $3.17

(Source:  TheEdgeSingapore March 19 2018)

Brokers' Digest 26 Feb 2018

Avi-Tech Electronics (Feb 21: 50.5 cents)

- Maintain BUY

- Avi-Tech reported great 1HF2018 results, with revenue growing 19.5% y-o-y and operating income surging 14.9% y-o-y.

- We remain positive on Avi-Tech's outlook, which is likely to benefit from increased electronics in the automotive sector

- DCF based price target of 59 cents (23% upside).  This implies a 12xFY2018F PER.  It also provides an attractive FY2018F dividend yield of 6.9%

Far East Hospitality Trust (Feb 21: 72.5 cents)

- Maintain BUY

- Far East Hospitality Trust's results were within expectations

- We continue to see 2018 as a period of recovery from this low base, though we tweak our RevPAR growth rates for FY2018 downwards. 

- After adjustments, our fair value decreases from 77 cents to 75 cents

Lippo Malls Indo Retail Trust (Feb 21: 39 cents)

- Downgrade to Hold

- Lippo Malls Indo Retail's Trust's 4Q2017 results were within expectations.

- We recognize that the negative sentiment related to a potential rights issue will continue to weigh on the trust, as investors may be unwilling to accumulate additional units in the interim.

- We have decided to apply a 10% haircut to arrive at a fair value of 40.5 cents, down from previous fair value of 46 cents

Oversea-Chinese Banking Corp (Feb 21: $13)

- Maintain Add

- FY2017 net profit was in line with consensus

- Similar to peers, OCBC took advantage of the upcoming FRS 109 and cleaned up its oil and gas loan book

- We raise our FY2018-2019F EPS by 3.3% to 6.1% on higher non-NII and lower credit costs.  A higher Gordon Growth Model based price target of $14

Roxy-Pacific Holdings (Feb 21: 57 cents)

- Maintain Buy

- We believe Roxy, being one of the earliest to landbank in the current market cycle, has six free-hold residential developments in Singapore that will be ready for launch in 2018, with two to three to be launched within 1Q2018

- Price target of 69 cents is based on a 30% discount to RNAV of 98 cents

Singapore Airlines (Feb 21: $11.29)

- Maintain Hold

- Singapore's Finance Minister announced in Budget 2018 that all facilities producing 25,000 tonnes or more of greenhouse gas emissions in a year will have to pay carbon tax from 2020

- In our view, the most direct impact will be higher fuel costs, as producers of jet fuel are likely to pass on the cost of carbon tax to the airlines.  We believe the impact will be mitigated for two reasons: an active fuel hedging strategy helps reduce volatility of fuel costs, and in progress renewal of fleet to more fuel efficient aircraft such as the A350s

- Unchanged fair value of $10.85

StarHub (Feb 21: $2.55)

- Maintain Fully Valued

-  4Q2017 service revenues of $571.7 million were in line with expectations

- On valuation, StarHub is expensive at a forward PER of 21x (versus sector average of 15x) and 10.2x EV/Ebita (versus sector average of 8.5x)

- While StarHub maintained an annual DPS of 16 cents in 2017 (5.6% yield), its annual DPS could be cut to 14 cents in FY2019F.  DCF based price target of $2.20

Thai Beverage (Feb 21: 83.5 cents)

- Maintain Hold

- 1QFY9/2018 core net profit of THB5.3 billion was below expectations at 18.8%/18.3% of our/consensus FY2018 estimates

- We cut FY2018-FY2020F EPS by 0.6% to 1.7%, as we factored in higher selling expenses

- A lower sum of the parts (SOTP)- based price target of 98 cents (from $1) as we revalue ThaiBev's stake in Sabeco

United Overseas Bank (Feb 21: $27.60)

- Maintain Buy

- UOB's FY 2017 net profit came in at $3.4 billion (+9% y-o-y)

- We have made marginal tweaks to our FY2018-FY2019F earnings after incorporating actual FY2017 numbers.

- Our price target of $29.50 is based on the Gordon Growth Model, equivalent to 1.3x FY2018 P/BV, almost at its 10-year average P/BV multiple

(Source:  TheEdgeSingapore February 26 2018)

Brokers' Digest 19 February 2018

CEI (Feb 12: $1)

- Downgrade to HOLD

- FY2017 revenue grew 5% y-o-y, but gross profit margin fell slightly to 23.1% versus 23.3% in FY2016, resulting in core net profit coming in 13% below our expectations

- In terms of outlook, CEI expects to continue generating net profit in FY2018F

- We cut our FY2018-FY2019F EPS for weaker margins.  Rolling over to FY2019F, our price target is reduced to $1

CITIC Envirotech (Feb 12: 71 cents)

- Maintain BUY

- Management is exceptionally confident about the company's outlook amid strong government emphasis on environmental protection and we share their confidence

-  With management bidding for multiple mega projects and confident of winning some, we believe CEL can deliver at least another $1 billion in project wins in 2018

- We raise our 2017 to 2019 net profit forecasts by 2.8%, 10.4% and 19.2% respectively

- Discounted cash flow based price target raised to $1.11

DBS Group Holdings (Feb 12: $27.31)

- Maintain OUTPERFORM

- Final dividend of 60 cents (versus 30 cents in 2016) and special dividend of 50 cents were declared, a major positive surprise.

- We have trimmed 2018 net profit estimate by 4% to factor in higher expenses, but kept 2019 net profit estimates unchanged

- We roll forward our price target to $31.10 a share

Frasers Property (Feb 12: $1.93)

- Maintain BUY

- We are the most bullish among consensus and we believe FPL will benefit from the recovery in Singapore office market

- Despite its diminishing landbank in Singapore, we believe any potential landbanking activities will be a positive catalyst

- Price target of $2.35, implying a 1x price to NAV

mm2 Asia (Feb 12: 46.5 cents)

- Maintain BUY

- Net earnings jumped a smaller 53% to $6.4 million on lower margins

- Having a strong presence in the entire value chain of content creation and distribution further cements mm2's status as a leader in the media/entertainment industry

- Price target of 75 cents, as we roll forward valuation to FY2019F

Moya Holdings Asia (Feb 12: 8.8 cents)

- Maintain BUY

- It is now Indonesia's largest water treatment operator

- We advise investors to accumulate the stock after the recent share price correction

- Unchanged DCF-backed price target of 17 cents (91% upside)

Neo Group (Feb 12: 66.5 cents)

- Maintain NEUTRAL

- Neo Group has managed to turn in a profit in 3QFY2018, in line with our expectations

- The group has an interest cost of 3% to 3.5%.  Given the huge borrowings, the interest payment easily represents 50% of our FY2018F Patmi

- The group still needs at least two to three years of spectacular results to bring down its net gearing ratio to a more reasonable level.

- Price target of 64 cents (4% downside)

Perennial Real Estate Holdings (Feb 12: 83.5 cents)

- Maintain ADD

- Perennial reported a 25.7% y-o-y drop in 4Q2017 revenue to $16 million, while net profit came in 8% higher y-o-y at $27.6 million

- We expect FY2018F earnings to benefit from additional rental contributions in China, while development contributions are likely to be felt from FY2019F.

- Our price target of $1.12 is based on a 40% discount to revalued NAV.

Singapore Telecommunications (Feb 12: $3.36)

- Maintain BUY

- Singtel's 9MFY2018 operating revenue grew 6.5% y-o-y to $13.21 billion, largely driven by Australia consumer and Digital Life

- Looking ahead, we reiterate our positive view on Singtel's longer-term outlook, given its focus to grow its cybersecurity, ICT solutions capabilities, digital advertising and other digital related businesses

- However, on fairly muted contributions from associates ahead, we adjust our forecasts slightly downwards and reduce our fair value from $4.19 to $4.15

(Source:  TheEdgeSingapore February 19 2018)