Singapore Strategy - DBS Research 2017-11-27: 2018 Top 15 Stock Picks (Part 1 Of 3)

Singapore Strategy - DBS Vickers 2017-11-27: 2018 Top 15 Stock Picks (Part 1 Of 3) Singapore Stock Market 2018 Top Stock Picks CITY DEVELOPMENTS LIMITED C09.SI GENTING SINGAPORE PLC G13.SI OVERSEA-CHINESE BANKING CORP O39.SI SEMBCORP MARINE LTD S51.SI SINGTEL Z74.SI

Singapore Strategy - 2018 Top 15 Stock Picks (Part 1 Of 3)

  • Singapore Market Focus - 2018 Outlook - Top 15 Stock Picks (Part 1) 

City Development (Rating: BUY, Target Price: $14.03) 

  • With the Singapore property market in the nascent stages of an upturn, City Developments is largely seen as a key proxy to upward trends in the Singapore residential market and has historically traded up to 1.2-1.3x P/NAV, which our TP implies. 
  • City Dev is gearing up to launch four projects in Singapore over 2018/1Q19. The successful take-up will lift valuations higher.
  • See report: City Developments - Gearing Up For New Launches

Genting Singapore (Rating: BUY, Target Price:  $1.51) 

  • We were early in our upgrade of Genting Singapore (GENS), and recommended the stock at the low of S$0.80 in August 2016 (see report: Genting Singapore - Starting The Growth Engine). The stock has rallied, generating returns of 70% on the back of earnings recovery from lower bad debts and the effects of its cost-cutting measures. Despite the rally, GENS still offers compelling value as it trades at 9.5x FY18F EV/EBITDA, which is slightly above –1SD of its mean of 9.2x. In addition, it trades at c.40% discount to its Macau peers on an EV/EBITDA basis which is close to -1SD of its mean EV/EBITDA differential.
  • Recovery in the VIP rolling chips, evident since the previous quarter, will power the next leg of growth. Together with the potential of winning the Japanese casino bid in the medium term, we believe GENS can re-rate closer to its average EV/EBITDA multiple of c.12x, and grow earnings by 11% in FY18F. Dividend yield is decent at c. 2.5% for FY18F.
  • See report: Genting Singapore - Stay On The Winning Table

OCBC Bank (Rating: BUY, Target Price:  $13.50) 

  • Apart from its sustained strong showing of its non-interest income franchise (wealth management and insurance), OCBC's banking operations are picking up well. NIM is gradually improving and such trends should hold up going into 2018.
  • Positively, loan growth is strong with YTD loan growth at 5.5% vs our FY17 forecast of 7%. Management is now guiding for 7-8% loan growth for FY17-18. Wealth management and insurance operations are holding up well, and will remain a key differentiator of growth vs peers. Asset quality indicators have clearly stabilised; a visible recovery would stage a strong rerating catalyst for the bank.
  • See report: OCBC Bank - Radiating Positive Vibes

Sembcorp Marine (Rating: BUY, Target Price:  $2.30) 

  • We expect a recovery in earnings with rising order wins translating to higher revenue, cost savings from the return of old facilities to the government, and potential profits from delivery of jackup rigs. The re-rating on Sembcorp Marine (SMM) will continue, driven by:
    1. SMM is a pure play to ride the oil price recovery; 
    2. potential sizeable new orders for non-drilling solutions;
    3. the reactivation of Sete’s projects; and
    4. SMM as a potential M&A play arising from a consolidation of Singapore yards.
  • See report: Sembcorp Marine - On Recovery Track

Singtel (Rating: BUY, Target Price:  $4.30) 

  • Singtel’s core plus digital business is trading at only 5.6x FY18F EV/EBITDA versus 7x for M1, 9x for StarHub and 7.5x regional telco average. 
  • Despite the ~38% rise in the valuation of regional associates over the last three years, the stock has been flattish, due to mounting losses in the digital businesses perhaps. However, with digital advertising arm Amobee achieving an earlier-than-expected EBITDA breakeven in 1Q18, and official guidance for narrower digital losses in FY18F, we expect the valuation discount to disappear.
  • See report: SingTel - Unsustainable Discount For The Core And The Digital Business

Singapore Research DBS Vickers | http://www.dbsvickers.com/ 2017-11-27
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 14.030 Same 14.030
BUY Maintain BUY 1.510 Same 1.510
BUY Maintain BUY 13.500 Same 13.500
BUY Maintain BUY 2.300 Same 2.300
BUY Maintain BUY 4.300 Same 4.300