Singapore Strategy - UOB Kay Hian 2017-11-18: 3Q17 Report Card In Line But Upward Earnings Revision In 2018

Singapore Strategy - UOB Kay Hian 2017-11-18: 3Q17 Report Card In Line But Upward Earnings Revision In 2018 Singapore Stock Market Strategy BANYAN TREE HOLDINGS LIMITED B58.SI CITYNEON HOLDINGS LIMITED 5HJ.SI GL LIMITED B16.SI SEMBCORP INDUSTRIES LTD U96.SI SINGTEL Z74.SI

Singapore Strategy - 3Q17 Report Card In Line But Upward Earnings Revision In 2018

  • 62% of 3Q17 results were in line, with some positive surprises. 
  • We raise 2018 market EPS growth forecast to 6.5% (from 5.2%) on good performances from banks, telcos and Venture.


3Q17 performance mostly in line, but less beats. 

  • The 3Q17 reporting season was mainly in line, with 62% within expectations (2Q17: 51%), 16% exceeded (2Q17: 28%) and 22% below estimates (2Q17: 21%). 
  • Notable results included Venture Corp, which far surpassed market expectations. Genting Singapore’s 3Q17 results beat expectations amid a better-than-theoretical win rate, significant bad debt recoveries and improved VIP volume. 
  • DBS disappointed with additional NPL provisions of S$1.7b for its oil & gas (O&G) support services loans. 
  • SingTel’s 2QFY18 results were in line but its special dividend of only 3 S cents/share (vs consensus of 8-13 cents) was too conservative, in our view.


Upward revision of 2017-18F market EPS. 

  • Post the reporting season, we raised our market EPS growth to 6.7% yoy for 2017 (previously 5.6%) and 6.5% yoy for 2018 (previously 5.2%). 
  • Leading the upward revision in 2018 were sectors such as banks, aviation, telecommunications as well as technology (Venture Corp). 
  • Conversely, sectors that are currently being disrupted by technology, such as SPH and ComfortDelGro, continued to suffer earnings downgrades.

Banks: Healthy operating results; clean-up at DBS. 

Technology/exporters: Sparkling results from Venture. 

Property: Developers were below but S-REITs within expectations. 

Shipyards: Below expectations but industry bottoming out. 

  • With the exception of Sembcorp Industries, results of both Keppel Corp and Sembcorp Marine were below expectations. 
    • Keppel Corp’s 3Q17 net profit was affected by lower-than-expected property and infrastructure contributions. Core earnings showed signs of a turnaround and we are cautiously optimistic. 
    • Sembcorp Marine was impacted by revenue reversals and inventory write-offs. Although net gearing remained elevated, this is expected to decline to 1.0x after the receipt of US$500m from Borr. 
  • Our preferred exposure in shipyards is Keppel Corp (Rating: BUY/ Target Price: S$8.35, see report: Keppel Corporation (KEP SP) - UOB Kay Hian 2017-10-20: 3Q17 Earnings Bottom Out; Upgrade To BUY) as the O&M sector is bottoming and the group is on the cusp of embarking on its strategy to become a property and fund management giant.

Aviation: SIA outperformed expectations in 3QFY18 but we like SATS. 

End-2018 Straits Times Index (FSSTI) target of 3,530 but upside to 3,730 if there are more earnings upgrades. 

Andrew Chow CFA UOB Kay Hian | Singapore Research Team UOB Kay Hian | http://research.uobkayhian.com/ 2017-11-18
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 0.920 Same 0.920
BUY Maintain BUY 1.500 Same 1.500
BUY Maintain BUY 1.185 Same 1.185
BUY Maintain BUY 3.870 Same 3.870
BUY Maintain BUY 4.530 Same 4.530