Singapore Market Monitor - Maybank Kim Eng 2017-11-28: 2018 Top Stock Picks

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Singapore Stock Market 2018 Top Stock Picks CITY DEVELOPMENTS LIMITED C09.SI UOL GROUP LIMITED U14.SI GUOCOLAND LIMITED F17.SI ASCENDAS REAL ESTATE INV TRUST A17U.SI MAPLETREE INDUSTRIAL TRUST ME8U.SI COMFORTDELGRO CORPORATION LTD C52.SI SATS LTD. S58.SI SINGAPORE POST LIMITED S08.SI HEALTH MANAGEMENT INTL LTD 588.SI BEST WORLD INTERNATIONAL LTD CGN.SI STARHUB LTD CC3.SI M1 LIMITED B2F.SI

Singapore Market Monitor - Sector Preferences And Top Picks

Key Stock Picks 

• We have made a few changes to our six key BUY ideas that we highlighted in the previous quarter (Singapore Market Monitor - Drafting on cyclical tailwinds, 26 Sep 2017) and have also expanded the list to eight stocks.
• From our prior selection, UOB SP, CCT SP and GENS SP have been dropped from our top-picks list as, while our analyst team remains positive on the business fundamentals of these companies, they no longer have the requisite upside potential after the re-rating of the past three months.
• In addition, we highlight below two of our top sub-USD1b market cap SMID BUY ideas under coverage.

Top BUY Recommendations For Large Caps 

City Developments (CIT SP; Target Price SGD13.80): 

• Most liquid proxy to an impending rebound in Singapore's property market; Well-positioned to capture a home price rebound with three projects due for launch in 2018.
• CITY DEVELOPMENTS LIMITED (C09.SI)

UOL (UOL SP; Target Price SGD9.85): 

• Most concentrated large-cap proxy to Singapore's property market (c.80% of valuation); Potential for value unlocking in the medium term with restructuring of holdings.
• UOL GROUP LIMITED (U14.SI)

GuocoLand (GUOL SP; Target Price SGD2.90): 

• Compelling relative value and improving fundamentals compensate for lower stock liquidity; Relatively under-researched and a laggard within the sector.
• GUOCOLAND LIMITED (F17.SI)

Ascendas REIT (AREIT SP; Target Price SGD3.00): 

• Best proxy to the recovery we expect in the business parks segment of industrial space with c60% of portfolio exposure to this area.
• ASCENDAS REAL ESTATE INV TRUST (A17U.SI)

Mapletree Industrial (MINT SP; Target Price SGD2.10): 

• Executed on first overseas acquisition in line with its expanded investment mandate, comprising 14 US data centeres, which are supported by strong growth fundamentals.
• MAPLETREE INDUSTRIAL TRUST (ME8U.SI)

ComfortDelgro (CD SP; Target Price SGD2.40): 

• Downside for taxi segment priced in and trades at attractive ex-taxi FCF yield of 7.8% for FY18E. Key catalysts:
1. positive outcome from tie-up with Uber; and
2. turnaround of rail segment from Downtown Line 3, opened in Oct 2017.
• COMFORTDELGRO CORPORATION LTD (C52.SI)

SATS Limited (SATS SP; Target Price 5.70): 

• A number of medium-term growth catalysts expected to pan out over the next 12-18 months, including proposed JV with AirAsia (AIRA MK; MYR3.16; BUY; TP MYR3.75) for gateway services in Malaysia, catering for Turkish Airlines at Istanbul’s new international airport, Qantas (QAN AU; AUD5.57; NR) moving its connecting hub for UK flights back to Singapore and non-aviation commercial kitchens in China ramping up to contribute.
• SATS LTD. (S58.SI)

Singapore Post (SPOST SP; Target Price SGD1.50): 

• Three out of four key earnings contributors have shown a clearer sign of turnaround in the latest results and the new CEO has revealed a set of sound and executable initiatives from its strategic review.
• SINGAPORE POST LIMITED (S08.SI)

Top BUY Recommendations For Small/ Mid Caps 

Health Management International (HMI SP; Target Price  SGD0.80): 

• Unique independent operating model and top market share for medical tourists differentiate it from peers. More than doubling of capacity for Johor hospital and potential acquisition could further lift growth.
• HEALTH MANAGEMENT INTL LTD (588.SI)

Best World International (BEST SP; Target Price  SGD1.88): 

• China operations are expected to lead growth from continued geographical expansion, improved service quality and better brand confidence. Also, Taiwan unit should start to recover in 2018 after resolving the impact from heavy promotion last year. The market may be potentially misunderstanding recent revenue weakness to be due to operations rather than the change in mix of operating business model and geography that the company is undergoing.
• BEST WORLD INTERNATIONAL LTD (CGN.SI)

Key SELL recommendations

• Our key SELL recommendations, unchanged from the previous quarter, are: 

StarHub (STH SP; Target Price  SGD2.17): 

• Both wireless and pay TV businesses under siege from new-entrant risks on the former and changing viewing habits on the latter. Expect two consecutive years of over 20% net profit declines.
• STARHUB LTD (CC3.SI)

MobileOne (M1 SP; Target Price  SGD1.59): 

• Most exposed to Singapore wireless competition risk over the next couple of years. Investments in fixed broadband and tapping the enterprise sector is progressing but still small in the scheme of things and not adequate to defray the pain. Core profits are forecast to fall c39% and 19 % over the next two years.
• M1 LIMITED (B2F.SI)

• Singapore Market Monitor - Maybank Kim Eng 2017-11-28:
  • Singapore Market Monitor - Shifting Up A Gear
  • Singapore Market Monitor - 2018 Sector Preferences
  • Singapore Market Monitor - 2018 Top Stock Picks

Neel Sinha Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2017-11-28

Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 13.800 Same 13.800

BUY Maintain BUY 9.850 Same 9.850

BUY Maintain BUY 2.900 Same 2.900

BUY Maintain BUY 3.000 Same 3.000

BUY Maintain BUY 2.100 Same 2.100

BUY Maintain BUY 2.400 Same 2.400

BUY Maintain BUY 5.700 Same 5.700

BUY Maintain BUY 1.500 Same 1.500

BUY Maintain BUY 0.800 Same 0.800

BUY Maintain BUY 1.880 Same 1.880

SELL Maintain SELL 2.170 Same 2.170

SELL Maintain SELL 1.590 Same 1.590