Sunday, February 23, 2014

DBS Vickers Report 24 Feb 14

Today’s Focus
􀂃 Singapore Budget - Minimal impact on earnings from
increase in CPF contributions; boost for healthcare
industry but impact on listed healthcare players muted
􀂃 Frasers Centrepoint Ltd – Initiate coverage with a BUY
rating and target price of S$2.08
With the current 4Q results season unable to reverse the
downward earnings revision trend and the QE tapering
process still ongoing, we see no change to our view that the
STI should be capped at 3150 or just slightly above over the
course of CY1Q. STI’s correction ended at 2950 in early
February but the daily stochastics is now overbought
following the 150pt rally since then. Still, the ability to head
passed the immediate resistance level at 3050 last week
means that any pullback should be halted at 3030-3050.
Beyond CY1Q, we maintain our view for the STI to head
towards 3350.
The government has proposed to raise the employer’s CPF
contribution by 1% across the board, and 0.5% to 1%
additional contributions for older workers (above 50 years
old) from Jan 2015. The bulk of the increase will be
channelled to the employee’s Medisave account. This will
affect labour intensive industries in the service sectors such as
banks, hotels, hospitals, retail, transport, construction and
marine. However, the impact on these listed companies is
minimal, estimated at -0.3% to -1% of net earnings. In
addition, half of the first year’s additional CPF cost will be
subsidized by the government.
The government’s generous S$8b Pioneer Generation
Package is positive for the healthcare industry. However, the
impact on listed private healthcare players is relatively muted.
The thrust of the budget is to provide healthcare support for
the lower, middle-income households, as well as the aged -
Pioneer Generation. Traditionally, the target markets for the
private healthcare players are the more affluent patients, and
international patients. Maintain HOLD recommendation for
Raffles Medical (TP: S$3.15) and IHH Healthcare (TP: RM3.94/
S$1.53), as their positive long term prospects have been
priced in.
US Indices Last Close Pts Chg % Chg
Dow Jones 􀀙 16,103.3 (29.9) (0.2)
S&P 􀀙 1,836.3 (3.5) (0.2)
NASDAQ 􀀙 4,263.4 (4.1) (0.1)
Regional Indices
ST Index 􀀘 3,099.9 13.3 0.4
ST Small Cap 􀀘 536.6 3.1 0.6
Hang Seng 􀀘 22,568.2 174.2 0.8
HSCEI 􀀙 9,936.3 (41.8) (0.4)
HSCCI 􀀘 4,226.8 7.7 0.2
KLCI 􀀘 1,830.7 2.9 0.2
SET 􀀘 1,304.2 0.2 0.0
JCI 􀀘 4,646.2 47.9 1.0
PCOMP 􀀙 6,308.4 (44.4) (0.7)
KOSPI 􀀘 1,957.8 27.3 1.4
TWSE 􀀘 8,601.9 77.2 0.9
Nikkei 􀀘 14,865.7 416.5 2.9
STI Index Performance
Singapore
Total Market cap (US$bn) 569
Total Daily Vol (m shrs) 2,261
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
21 Feb
Target Price
(S$)
Hutchison Port Hldgs Trust (US$) Buy 0.630 0.76
Keppel Corp Buy 10.470 12.60
ST Engineering Buy 3.790 4.90
Yangzijiang Buy 1.140 1.32
Stock Picks – Small /Mid Cap
Rec’n Price (S$)
21 Feb
Target Price
($)
Ezion Holdings Buy 2.300 3.26
China Merchants Buy 0.900 1.20
Pacific Radiance Ltd Buy 0.955 1.05
Nam Cheong Buy 0.340 0.43
Source: Bloomberg Finance L.P., DBS Bank
Singapore
Wired Daily
Page 2
Telcos are key beneficiaries. Telecom companies will benefit
from the government’s broadband initiatives of S$500m to
subsidize SMEs for Fiber broadband connection and
landlords on broadband infrastructure. Starhub is the prime
beneficiary.
Margin pressure on construction sector remains. The push
to raise productivity gains for construction companies and
raising levies on basic skilled workers will continue to put
pressure on margins. However, news that the government
will not impose further tightening measures on the inflow
of foreign workers is a relief, and will benefit Centurion, the
only listed operator of foreign workers’ dormitories.
We initiate coverage on Frasers Centrepoint Ltd (FCL) with a
BUY rating and target price of S$2.08. As the fourth largest
listed developer, FCL offers investors a sizeable listed
investment option with a market cap in excess of S$4bn and
asset value of S$11.5bn. An estimated 47% of its gross
asset value is exposed to development properties, 33% to
investment properties and REITs, and the remaining to
hospitality and other activities. Its core markets are
Singapore, China and Australia. FCL is a complete value
chain player with strong niche markets in Singapore, China
and Australia, and strong pre-sales that provides a very
visible earnings stream over the next 2-3 years. The Group
optimises risk and return with geographical and business
diversification, and strong balance sheet to support value
creation activities. Key risk is its small free float, with major
shareholders, TCC Group and Thai Beverage holding a total
87.9%, which we believe can be addressed in the longer
run.
4Q13 core earnings for Wilmar were in line with
our/consensus expectations. S$0.055 final DPS was
declared. The drop in Sugar pretax was offset by much
stronger Oilseeds & Grains, Plantations and Consumer
pretax. Target price raised to S$3.92 (Prev S$ 3.83) on
reduced capex. We have not yet imputed the acquisition of
Shree Renuka, pending analysis. The lower expected
soybean/soybean oil prices in 2H14 should boost Wilmar’s
Merchandising and Processing (M&P) pretax. BUY call
reiterated for 17% potential return.
FY13 results for Noble Group largely in line. Final DPS of
0.91 UScents was declared, halved from 1.81 UScents a
year ago. We have lowered our FY14/15F core profits by
6.2%/5.5% after fine-tuning our operating cost, and net
interest expense assumptions. Accordingly, our target price
is reduced to S$1.09 (Prev S$ 1.15). We are awaiting
stronger recovery; maintain HOLD.
Global Logistic Properties (GLP) has signed a strategic
partnership agreement with Sinotrans Logistics to develop a
national network of logistics facilities across China. The
partnership enhances GLP’s access to strategic land holdings
and strengthens its position as the top logistics solution
provider in China.
Separately, GLP has also established a strategic partnership
with Best Logistics to develop a national network in China.
GLP and Best Logistics have signed lease agreements for
nine build-to-suit facilities totaling 143,000 sqm (1.5m sq ft)
RH Petrogas issued profit guidance for 4Q13, mainly due to
write-off for two unsuccessful exploration wells and also for
other exploration and evaluation expenditures.
Genting Hong Kong the Group is expected to record a
significant increase in net profit for FY Dec 13 as compared
with that of the FY12, mainly attributable to the gains on
disposal of certain stakes in Norwegian Cruise Line Holdings
as a result of its initial public offering.
K1 Ventures has entered into an agreement to divest
transportation leasing business for approximately US$152m.
The sale is part of the Company’s proactive management of
its investments with the aim of enhancing shareholder
value

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