Thursday, October 24, 2013

DBSVickers Report 25 Oct 13

Singapore Banks - Stable NIM and slower loan
growth expected for 3Q
 Del Monte Pacific -Downgrade to HOLD after recent
outperformance
 Tiger Airways - Too much turbulence; downgrade to
FULLY VALUED with TP cut to S$0.47
 Mapletree Commercial Trust - Lack of acquisitions
limits upside to DPU. Downgrade to HOLD, TP revised
to S$1.32
Our analyst expects stable net interest margin (NIM) and
slower loan growth for the upcoming 3Q results for the
banks. NIM should remain fairly stable, tracking trends
recorded in 2Q13. System loan growth is trending down,
as expected. We expect loan growth to normalise at a
more modest c.2% q-o-q, after the chucky loan growth
seen in 1H13. In line with the softer capital market
environment, market-related income is expected to
moderate q-o-q. We also expect slower regional
contribution due to both currency and macro effects.
Preference for OCBC (BUY, TP: S$12.40) remains.
Although OCBC may record another relatively feeble
quarter from its insurance business contribution (we have
lowered our FY13F earnings by 5% accordingly), we
believe its banking operations will remain strong. OCBC
will release 3Q results on 1 Nov and UOB on 5 Nov.
Unlike the market’s optimism, we are neutral on Del
Monte Pacific’s proposed US$1.7bn acquisition of USbased
Del Monte Foods’s Consumer Food Business.
Earnings accretion to common equity holders is estimated
to be minor in the interim, and is highly sensitive to
acquired entity’s business performance going forward.
3Q13 earnings were in line. Going forward, the Group’s
growth profile will be altered, given the consolidation of a
larger entity with lower growth. We estimate that revenue
contribution from Philippines will drop to 14% in FY14F,
down from 62% in FY13F. Downgrade to HOLD after
recent outperformance; TP reduced slightly to S$0.96
(Prev S$0.97). There are possible downsides to dividend
payout, given its high gearing of c.1.8x post-acquisition,
in our view.
US Indices Last Close Pts Chg % Chg
Dow Jones  15,509.2 95.9 0.6
S&P  1,752.1 5.7 0.3
NASDAQ  3,929.0 21.9 0.6
Regional Indices
ST Index  3,218.0 13.1 0.4
ST Small Cap  546.4 1.3 0.2
Hang Seng  22,835.8 (164.1) (0.7)
HSCEI  10,322.1 (135.2) (1.3)
HSCCI  4,437.5 (29.6) (0.7)
KLCI  1,818.9 4.8 0.3
SET  1,466.3 9.0 0.6
JCI  4,594.8 48.3 1.1
PCOMP  6,583.8 (51.3) (0.8)
KOSPI  2,046.7 10.9 0.5
TWSE  8,413.7 20.1 0.2
Nikkei  14,486.4 60.4 0.4
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013
100-Day MA
Index
STI
Total Market cap (US$bn) 599
Total Daily Vol (m shrs) 2,080
12m ST Index High 3,454
12m ST Index Low 2,946
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price ($)
24 Oct
Target Price
($)
ST Engineering Buy 4.160 4.80
ComfortDelgro Buy 1.910 2.19
OCBC Bank Buy 10.450 12.40
Singapore Airlines Buy 10.450 11.40
Stock Picks – Small /Mid Cap
Rec’n Price ($)
24 Oct
Target Price
($)
Ezion Holdings Buy 2.240 3.10
Goodpack Buy 1.890 2.00
CSE Global Buy 0.880 1.07
Frasers Centrepoint Trust Buy 1.850 2.14
Source: Bloomberg Finance L.P., DBS Vickers
Singapore
Wired Daily
Page 2
2Q-FY14 results for Tiger Airways disappoint (core net loss of
S$35m) as Tigerair Singapore slips into the red. No significant
improvement from associates in Australia, Indonesia and
Philippines either. Factoring in lower load factors and higher
costs at Tigerair Singapore and wider losses from associates,
we push up our core loss estimate for FY14 to S$80m from
S$11m previously, and we now believe the Group is unlikely
to turnaround in FY15 as well. Downgrade to FULLY VALUED
with TP cut to S$0.47 (Prev S$ 0.74).
2Q14 results for Mapletree Commercial Trust in line. Strong
rental reversions provide solid platform for organic income
growth. However, lack of acquisitions limits upside to DPU.
Downgrade to HOLD, TP revised to S$1.32 (Prev S$ 1.35).
Capitamall Trust’s 3Q13 results in line. Tampines Mall will be
undergoing S$65m of AEI works in 1Q14. Going forward,
rising labour costs could cap reversionary upside. Maintain
HOLD, TP raised to S$2.16 (Prev S$ 2.07) as we roll forward
our valuations.
Far East Hospitality Management will launch three Singapore
hotels over the next three months. These are the Village
Hotel Katong in the Marine Parade/East Coast area, Amoy at
Far East Square in the Chinatown/CBD area, and a relaunch
of the Rendezvous Grand Hotel in the Bras Basah area which
Far East Hospitality Trust (FEHT) acquired recently from Straits
Trading Company.
Tiong Seng Holdings has been awarded a contract worth
approximately $42.7m for the proposed erection of a 7-
storey industrial building with underground tanks at One-
North.
Stamford Tyres has appointed a dealer, Al Habtoor Motors,
for Sumo Firenza tyres in the United Arab Emirates to expand
its presence in the Middle East.
Changtian Plastic & Chemical expects to report a loss for the
third quarter ended 30 September 2013. This was mainly due
to an impairment loss on the Group’s property, plant and
equipment.
Mainland Chinese, Malaysians, Indonesians and Indians
continued to remain the top four nationalities among the
combined pool of foreigners and Singapore permanent
residents who bought private homes in the first nine months
of this year. Together they accounted for 81.3% of the 4,028
private homes purchased by PRs and foreigners in Jan-Sept
2013, similar to their 80.9% share of the 7,717 private
homes that PRs and foreigners picked up in 2012, according
to property consulting group DTZ.
Manufacturing activity in China has risen to a seven-month
high this month, led by new orders. The flash HSBC Markit
PMI released yesterday, a week ahead of the month's final
reading, was 50.9, above market expectations. A breakdown
of the PMI or purchasing managers index showed most subindices
over-performing. Output rose to a six-month high of
51 from 50.2; new orders were up 0.8 point to 51.6, a
seven-month high; purchases of inputs climbed above 50 for
the first time in nine months; and employment increased to
49.9 from 48.8.
US stocks rose on a busy day of results releases as earnings
generally beat estimates and signs of slower economic
growth underpinned expectations that the FED will delay QE
tapering. The US 10-year bond yield stayed around the 2.5%
mark. Of the 217 S&P500 companies that have released
results so far, 77% beat bottom line consensus estimates
while 53% beat sales estimates.

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