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Singapore Stock Alpha Picks - UOB Kay Hian 2017-12-06: Conviction Picks To End The Year 2017

Singapore Stock Alpha Picks - UOB Kay Hian 2017-12-06: Conviction Picks To End The Year Singapore Stock Picks Singapore Stocks To Buy Now CITY DEVELOPMENTS LIMITED C09.SI CDL HOSPITALITY TRUSTS J85.SI GL LIMITED B16.SI SATS LTD. S58.SI THAI BEVERAGE PUBLIC CO LTD Y92.SI CITIC ENVIROTECH LTD. CEE.SI SINGTEL Z74.SI WING TAI HLDGS LTD W05.SI

Singapore Stock Alpha Picks - Conviction Picks To End The Year

  • We add City Dev and CDREIT, and remove Tianjin as we head towards the year-end.

WHAT’S NEW


SATS shines but mixed for the rest. 

  • SATS stood out in November, rising 12.6% mom. However, it was mixed performance for the rest of our alpha picks, with profit-taking seen in Wing Tai and Citic Envirotech despite the latter’s announcement of a huge Rmb4.6b contract win in Lanzhou City, China. 
  • Tianjin Zhongxin fell by a disappointing 8.7% mom as 3Q17 results missed expectations.


ACTION


Sticking with reflation; add City Developments and CD REIT, and remove Tianjin Zhongxin. 

  • We review our picks and include City Developments after an 11% pull-back from its recent high as we still favour the reflation theme. CD REIT looks compelling on expectations of improving hospitality outlook. 
  • While longer-term prospects for Tianjin Zhongxin remain compelling, we remove it from our alpha picks, given its earnings miss in 3Q17 as well as a delay in catalysts, such as the timeline for the expected ASP increase.


City Development – BUY (Analyst: Vikrant Pandey/ Loke Pei Hao)

  • Proxy to ride on the Singapore residential recovery (40% of GAV), with the largest residential landbank of 2,090 attributable units.
  • Beneficiary of stock rotation in the real estate space as Global Logistics Properties (GLP) privatises in Jan 18.
  • Value accretion from the potential privatisation of Millennium & Copthorne. The bid is expected to be announced by 8 Dec 17 (at 552.5p per share for all outstanding shares).

Share Price Catalyst

  • Event: Millennium & Cothorne privatisation bid on 8 Dec 17. Rotational interest from GLP privatisation in Jan 18. 
  • Timeline: Positive newsflow on Amber Park launch and projects within the vicinity next year.




CDREIT – BUY (Analyst: Vikrant Pandey/ Loke Pei Hao)

  • CDREIT’s Singapore hotel operations (accounting for 57.2% 9M17 NPI) to benefit from: 
    1. a recovery in corporate travel ,
    2. Chinese visitor growth, and
    3. tight supply pipeline.
  • Hotel room supply is limited beyond 2017, with only 1,139, 1,465 and 392 rooms coming on stream in 2018-20 respectively (4Q17: 1,532 new rooms).
  • Its Singapore hotels saw a 0.8% yoy increase in ADR to S$187 in 3Q17, despite a 2ppt yoy drop in occupancy, resulting in 1.4% yoy decline in Singapore RevPAR.

Share Price Catalyst

  • Event: Positive datapoints on visitor arrivals, ALOS, ADR, RevPAR and supply pipeline.
  • Timeline: 1H18.




GL Limited – BUY (Analyst: Edison Chen/ Yeo Hai Wei)

  • BUY with SOTP-based target price of S$1.185.
  • Owns prime hospitality assets, with over 4,700 hotel rooms in London.
  • New managing director (appointed on Sep 16) could signal a streamlining of assets, including disposal of non-core businesses.

Share Price Catalyst

  • Event: Sale of non-core businesses including Clermont Casino (UK) and Molokai, Hawaii land. Another possible catalyst is privatisation as shares are trading at a deep discount to SOTP valuation.
  • Timeline: Potential asset disposals in the next 3-6 months.




SingTel – BUY (Jonathan Koh)

  • Telkomsel continues to maintain double-digit growth in subscriber base and revenue growth from voice and data. Bharti should start to recover in FY19 due to industry consolidation (Bharti recently merged with Tata Teleservices’ consumer mobile business).
  • The group is least affected by a fourth mobile operator in Singapore as overseas businesses account for about 70% of its bottom-line. BUY with DCF-based target price of S$4.53 (6.1% required rate of return and 1.5% terminal growth).

Share Price Catalyst

  • Event: Fund flow into laggards, including SingTel which offers good dividend yield.
  • Timeline: Better-than-expected 3QFY18 results to be announced in Feb 18.




Wing Tai – BUY (Analyst: Vikrant Pandey/ Loke Pei Hao)

  • BUY with RNAV-based target price of S$2.78, pegged at a 20% discount to RNAV of S$3.48/share. Wing Tai is trading at 0.54x 2017F P/B (lowest within our coverage of property stocks) and a deep 39% discount to RNAV.
  • At a net gearing of 2.4%, Wing Tai is well positioned to deploy its sizeable debt headroom of S$1.5b (assuming a comfortable net gearing level of 50%). We believe Wing Tai will further deepen its footprint in Singapore, Malaysia (post privatisation completion) and Australia.

Share Price Catalyst

  • Event: Launch of the recently-acquired Serangoon North Avenue 1 site. We also see potential for Wing Tai to buy more landbank, given its S$1.5b acquisition headroom.
  • Timeline: Potential 6-9 months for landbank acquisition or launch of its Serangoon North Avenue 1 site.




SATS – BUY (Analyst: K Ajith)

  • SATS recently announced plans to provide catering services to Turkish Airlines when the new Istanbul New Airport opens in 2018. It also announced an extensive JV with AirAsia for ground handling operattions in Malaysia.
  • Potential earnings upside as its 28%-owned Beijing Airport In-flight Kitchen (BAIK) and Beijing Ground Services (BGS) will operate at the new Daxing airport in 2019.
  • We expect SATS to benefit from higher gateway services revenue, driven by strong global cargo volumes. We think SATS is a better play than SIA on stabilising pax yields or higher cargo throughput, given SIA’s exposure to volatile fuel prices.

Share Price Catalyst

  • Event: Higher cargo volumes and stabilising inflight catering ASP.
  • Timeline: Next 3-6 months.




Thai Beverage – BUY (Analyst: Thai Wei Ying/Andrew Chow)

  • Alcohol consumption in Thailand is expected to recover in FY18 after the end of the mourning period. The NAB segment has achieved EBITDA breakeven in FY17, which is better than initial guidance
  • Our SOTP-based target price is S$1.11. THBEV is trading at 20.1x 2018F PE, which is still lower than global average of 31.1x 2018F PE for spirits peers, 21.9x for beer companies and 27.2x for NAB companies.

Share Price Catalyst

  • Event: A recovery in alcohol consumption will likely enhance earnings for FY18. Other possible catalysts include market share gains in beer as well as accretive M&A.
  • Timeline: Possibly in the next six months.




Citic Envirotech – BUY (Edison Chen/Nicholas Leow)

  • Recent contract win of Rmb4.2b should provide investors more assurance over the company’s medium-term prospects as well as earnings visibility.
  • We have a street-high DCF-based target price of S$1.10, implying a 52% upside.
  • Beneficiary of favourable industry dynamics, investors can look forward to new areas of growth in river rehabilitation, sludge treatment and the circular economy.

Share Price Catalyst

  • Event: More contract wins that could underpin FY18 earnings growth.
  • Timeline: 3-6 months, as clean water is a high priority for the Chinese government. This would benefit the company, which has an impressive track record and technology.










Singapore Research UOB Kay Hian | http://research.uobkayhian.com/ 2017-12-06
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 14.030 Same 14.030
BUY Maintain BUY 1.880 Same 1.880
BUY Maintain BUY 1.185 Same 1.185
BUY Maintain BUY 6.000 Same 6.000
BUY Maintain BUY 1.110 Same 1.110
BUY Maintain BUY 1.100 Same 1.100
BUY Maintain BUY 4.530 Same 4.530
BUY Maintain BUY 2.780 Same 2.780

* Alpha Picks denotes a timeframe of 1-3 months and not UOBKH’s usual 12-month investment horizon for stock recommendation.
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