Today’s Focus
Singapore Strategy – Prefer yields and value plays. Our
yield picks are ComfortDelgro, Singapore Post and Sheng
Siong; undervalued stocks are CWT, Thai Bev, Ezion,
Keppel Land and UOL
Singapore Land Transport - Positive transition for
operators. Maintain BUY on CD on higher TP of S$2.50;
HOLD SMRT with S$1.41 TP
The market is likely to consolidate ahead of the World Cup
and mid-term elections in the US. We peg STI’s year-end
objective at 13.9x (average) FY15F PE that is currently at 3400
and remain watchful of a short-term correction with base
support at 3100. Our strategy is to select value stocks with
catalysts to unlock value or play defensive, focusing on yield
plays and REITs. We prefer retail REITs – Mapletree Commercial
Trust, Frasers Centrepoint Trust, CapitaRetail China Trust and
Mapletree Greater China Commercial Trust –which delivers an
above average CAGR of 6%, driven by acquisitions and AEIs.
Our preferred yield plays are Singapore Post, which is the best
proxy in SGX to ride on the emerging e-commerce trend.
Revenue from e-commerce contributed 26% to its 1Q
earnings. We like Sheng Siong for its strong cash flows, stable
earnings and attractive dividend payout of 90%. The stock
currently yields 4.4%. Comfort Delgro is a key beneficiary of
the bus restructuring plan to a cost-plus contracting model,
which will stem existing losses and relieve the capex burden
from incumbents
We also like undervalued stocks with value realising potential
such as CWT, Thai Bev, Ezion, Keppel Land and UOL.
The Land Transport Authority (LTA) announced that it is
restructuring the public bus industry to a contracting model in
phases from 2H2014, with implementation from 2H2016. We
see this move as positive for both the current bus operators
(SBS Transit, ComfortDelGro’s subsidiary) and SMRT, as it
should erase losses currently incurred by both (c.S$40m in the
past year). The Government will also undertake the ownership
of infrastructure and operating assets, which will lighten the
burden on the operator’s financing requirements and balance
sheet.
Based on preliminary estimates/assumptions, we project that
CD and SMRT should see uplift in earnings from bus operations
to register EBIT of $25m and S$8m (from 2H2016),
respectively, accounting for c.5% of projected Group earnings
by then. However, these estimates may be subject to further
review given limited information. We have raised our target
price for CD to S$2.50 and SMRT to S$1.41, as we factor in
US Indices Last Close Pts Chg % Chg
Dow Jones 16,533.1 158.8 1.0
S&P 1,888.0 15.2 0.8
NASDAQ 4,131.5 34.6 0.8
Regional Indices
ST Index 3,261.8 (3.7) (0.1)
ST Small Cap 542.3 0.9 0.2
Hang Seng 22,836.5 1.8 0.0
HSCEI 9,995.4 111.2 1.1
HSCCI 4,205.7 25.5 0.6
KLCI 1,877.0 (4.1) (0.2)
SET 1,402.9 8.2 0.6
JCI 4,910.3 14.3 0.3
PCOMP 6,762.4 (120.3) (1.7)
KOSPI 2,008.3 (2.9) (0.1)
TWSE 8,862.4 (25.4) (0.3)
Nikkei 14,042.2 (33.1) (0.2)
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,358
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$)
21 May
Target Price
(S$)
ComfortDelgro Buy 2.300 2.50
Global Logistic Properties Buy 2.800 3.31
Keppel Corp Buy 10.660 12.60
Mapletree Greater China
Commercial Trust
Buy 0.895 1.02
Stock Picks – Small Cap
Rec’n Price (S$)
21 May
Target Price
(S$)
Pacific Radiance Ltd Buy 1.180 1.20
Nam Cheong Buy 0.370 0.47
Centurion Corporation Buy 0.730 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
the potential uplift in earnings from 2016 in our DCF model.
At this stage, we still prefer CD given its diversification,
lower valuation and as the incumbent bus operator in
Singapore. Maintain HOLD for SMRT.
FY14 core earnings for Yoma Strategic Holdings slightly
below; property still going strong with Star City’s Zone C to
launch in 2H14; non-real estate besides tourism will take
time to contribute. FY15F earnings cut by 13% to trim LDR
sales and lowering estimates of non-property businesses.
Maintain BUY, target price slightly lowered to S$1 (Prev
S$1.02). As the long-stop date for Landmark’s acquisition
closes end of June, we expect the conclusion of the deal to
be a catalyst for the stock.
Manhattan Resources announced that it has entered into a
conditional sale and purchase agreement to acquire the
entire issued share capital of mining group Singxin
Resources at a price of S$1.0 billion. The proposed
acquisition marks the Group’s foray into the mineral mining
industry in the PRC and allows the Group access to
exploration activities in Xinjiang, PRC. As purchase
consideration, the Group plans to allot and issue 1,369.9m
new shares at S$0.73 per share, representing approximately
73% of the Group’s enlarged share capital. Conditional
upon the completion of the proposed acquisition, the
Group will offer a 1-for-1 bonus issue of 1,876.4m warrants
at an exercise price of S$1.00 per share for existing
shareholders and the vendors to counter the dilutive effects
of the new enlarged share base.
Lian Beng Group has secured a contract from Westlite
Dormitory worth approximately S$44.5m. The contract
period is 12.5 months.
Against a backdrop of Chinese developers turning to
Singapore to raise funds through bonds, Moody's has
revised its outlook for China's property industry to
"negative" from "stable". The revised outlook reflects the
credit rating agency's expectations for the fundamental
business conditions in the industry over the next 12 months.
Moody's sees a significant slowdown in residential property
sales growth, high inventory levels and weakening liquidity
over the coming 12 months. Moody's expects modest 0-5%
year-over-year growth (on a 12-month trailing basis) over
the next 12 months. This growth rate is materially lower
than the 26.6% y-o-y rise in nationwide cumulative
contracted sales in full year 2013.
US equity indices erased Tuesday’s declines after FED policy
makers said continued stimulus doesn’t risk sparking a jump
in the inflation rate. With inflation expected to remain well
below its 2% goal, the FOMC doesn’t “face a trade- off
between its employment and inflation objectives, and an
expansion of aggregate demand would result in further
progress relative to both objectives,” this according to the
FED minutes of its April 29-30 meeting. Tiffany shares lead
an advance among retailers as quarterly profit beat
estimates. Netflix Inc. said it will expand its online-video
service in Europe. Shares of oil refiners Exxon Mobil Corp
and Chevron Corp rose, following the rise in oil price
No comments:
Post a Comment