to $3.6 (prev $3)
�� US budget impasse keeps markets on tenterhooks as
the week begins
Stocks are likely to start the week on a negative note as
concerns mount that the US government is heading for a
partial shutdown by tomorrow as the Senate and House of
Representatives remains unable to come to an agreement on
the healthcare program when their fiscal year 2014 begins 1
Oct. With the FED stating that the timeline to start QE
tapering being contingent on upcoming data, eyes will also
be on this week’s US September employment numbers
scheduled for release this Friday. Meanwhile, Italy’s
government is on the verge of collapse after allies of former
leader Silvio Berlusconi said they’d quit the cabinet.
We believe that STI’s pullback off 3260 in mid-Sept signalled
the start of a consolidation band between c.3150-3250 in
the weeks ahead. Beyond the likely short-term range bound
behaviour, we continue peg a year-end objective at c.3330
or 13.9x (ave) FY14F PE. The year-end objective is on the
assumption that the upcoming deadline to raise the US debt
ceiling is met and there is little/no net forward earnings
downgrade for STI component stocks in the upcoming 3Q
results season.
DBSV Research is positive on Singapore banks. While
earnings are expected to be stable for the rest of the year,
we believe there is upside to NIM and earnings going into
2014. Our analyst raises Singapore banks to Overweight.
Besides improved prospects in 2014 coupled with possible
interest rate hikes, Singapore banks provide a flight-to-safety
theme in the near term, especially when compared with its
ASEAN counterparts. We have imputed NIM recovery and
stronger earnings growth for 2014. But 2013 earnings will
be subdued on flat NIM and normalised provisions.
Regionalization may see downside risk in markets such as
Indonesia and Thailand (UOB has exposure in these two
markets; OCBC only has exposure in Indonesia) in the shortterm.
Both UOB and OCBC derive close to 20% of profits
from their Malaysian operations that has till date remained
resilient. We would be cautious should there be further
significant tightening on consumer debt in Malaysia to rein in
household debt accumulation.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 15,258.2 (70.1) (0.5)
S&P �� 1,691.8 (6.9) (0.4)
NASDAQ �� 3,781.6 (5.
(0.2)
Regional Indices
ST Index �� 3,210.2 15.9 0.5
ST Small Cap �� 578.8 (0.0) (0.0)
Hang Seng �� 23,207.0 82.0 0.4
HSCEI �� 10,494.4 (46.7) (0.4)
HSCCI �� 4,423.2 7.8 0.2
KLCI �� 1,776.2 2.0 0.1
SET �� 1,417.5 (7.3) (0.5)
JCI �� 4,423.7 17.8 0.4
PCOMP �� 6,379.8 (27.6) (0.4)
KOSPI �� 1,999.8 (12.0) (0.6)
TWSE �� 8,230.7 46.0 0.6
Nikkei �� 14,760.1 (39.1) (0.3)
Dow Jones �� 15,258.2 (70.1) (0.5)
STI Index Performance
Singapore
Total Market cap (US$bn) 592
Total Daily Vol (m shrs) 4,712
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
27 Sep
Target Price
($)
ST Engineering Buy 4.210 4.80
ComfortDelgro Buy 1.955 2.19
OCBC Bank Buy 10.450 12.40
Singapore Airlines Buy 10.430 11.40
Suntec REIT Buy 1.685 1.78
Stock Picks – Small /Mid Cap
Rec’n Price ($)
27 Sep
Target Price
($)
Ezion Holdings Buy 2.370 3.20
Goodpack Buy 1.765 2.00
CSE Global Buy 0.905 1.07
Mapletree Commercial Trust Buy 1.230 1.35
CDL Hospitality Trust Buy 1.625 1.80
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
We believe that once these emerging ASEAN markets start
to recover from the current macro weakness, the Singapore
banks’ regionalisation journey should be back on track. We
prefer OCBC (Buy, TP: $12.4) over UOB (Hold, TP: $21.9).
SingTel doubled its excess usage charges to S$10.70 per GB
that is a positive for the sector. We expect M1 and StarHub
to follow soon. M1 is a key beneficiary of the price hike
cycle. We raise our FY14F/15F earnings 7%/14% assuming
that M1 charges S$10.70 per GB from Jan 2014 onwards.
Our TP is raised to S$3.60 based on DCF (WACC 6.5%,
terminal growth 0%). M1 is trading at 17x FY14F PER versus
19x for StarHub despite offering superior growth. M1’s
FY14F dividend yield of 5.3% is also superior to StarHub’s
4.7%. M1 is the only telco in Singapore, Malaysia &
Indonesia, which offers 5% plus yield with double-digit
earnings growth.
Nam Cheong has sold 4 Platform Supply Vessels for
approximately US$120 million to a new customer that is an
emerging offshore marine services company based in Latin
America. With that, the cumulative order book reaches
RM1.7 billion. The total sale of 20 vessels for 2013 is close
to the record high of 21 vessel sales achieved in 2012.
CM Pacific has entered into a conditional sale and purchase
agreement to sell its entire New Zealand property business
to China Merchants Properties Development for HK$356m.
The sale is targeted for completion in 4Q13, and the Group
will realise a gain of c. HK$111m on its P&L. The divestment
and consideration amount (which is about S 6.5cts per
share) is in line with our expectation and will help the Group
to focus on its core toll road business, while improving its
balance sheet slightly. Next up for the Group will be to look
for more toll road acquisitions to grow its business. Maintain
Buy and DCF-based TP of S$1.07, which assumes the
outstanding convertible bonds will be converted.
Sky Vue at Bishan Central by CapitaLand and Mitsubishi
Estate Asia received on the first day of its launch. 410 of the
505 units released for sale have been sold with one- and
two-bedroom units being the most popular among buyers.
The average price achieved for all the units sold is $1,500
psf. Prices ranged from an average $750,000 for a onebedroom
unit to an average price of $1.58 mil a threebedroom
unit.
US stocks fell as concerns grew that the budget impasse will
hurt economic growth. Over the weekend, congress
remained in deadlocked over Republicans’ insistence on
delaying the 2010 health-care law. The House has voted
231-192 to stop many of the Affordable Care Act’s central
provisions for one year and tie that to an extension of
government funding through Dec. 15.The Senate could
reject the House’s position when it comes into session today.
This development raises the prospect of the first government
shutdown since 1996, putting as many as 800,000 federal
employees out of work starting Tuesday, Oct. 1.
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