-->

Singapore Stock Alpha Picks - UOB Kay Hian 2018-01-04: Kicking Off In 2018

Alpha Picks - UOB Kay Hian 2018-01-04: Kicking Off In 2018 Singapore Stock Picks 2018 CITY DEVELOPMENTS LIMITED C09.SI SINGAPORE AIRLINES LTD C6L.SI GL LIMITED B16.SI KEPPEL CORPORATION LIMITED BN4.SI THAI BEVERAGE PUBLIC CO LTD Y92.SI CDL HOSPITALITY TRUSTS J85.SI CITIC ENVIROTECH LTD. CEE.SI SINGTEL Z74.SI WING TAI HLDGS LTD W05.SI

Singapore Stock Alpha Picks - Kicking Off In 2018

  • Adding Keppel Corp and SIA but removing SATS after its outperformance.



WHAT’S NEW


Reflation theme stands out. 

  • Our reflationary picks such as Wing Tai and City Developments delivered positive returns (+5.1% and +3.1% mom respectively) compared to the 0.9% mom pull-back in the broader FSSTI market. 
  • Thai Beverage underperformed (-4.7% mom) as the market did not view its investment in Sabeco positively, though we believe this could be partially due to its misperception of the funding for the stake. 
  • Citic also played catch-up in December, rising 4.2% mom as investors factored in its recent contract wins and strong earnings expectations in 2018.


ACTION


Adding Keppel Corp and SIA but removing SATS. 

  • We add Keppel Corp. The resolution from the US$422m global settlement would remove the legal overhang and investors can refocus on the group’s improving outlook for both property and O&M.
  • Another change is the addition of SIA and the removal of SATS. The former is after our recent BUY upgrade, whereas the latter is due to its solid 9% return since our inclusion into alpha picks in Aug 17.


Keppel Corp – BUY (Foo Zhi Wei/Andrew Chow)

  • Resolution of legal uncertainties over its involvement in corrupt payments in Brazil.
  • Limited impact on earnings from US$422m (S$570m) resolution as this would be substantially offset by disposal gains.
  • Net gearing is expected to fall to 45% in 2018 despite the large cash outflow owing in part to the substantial cash flow from its Keppel Cove divestment.

Share Price Catalyst

  • Event: Positive newsflow from contract wins and further de-leveraging from O&G assets.
  • Timeline: 6-12 months.





SIA – BUY (K Ajith)

  • Early signs of pax yield improvement. While SIA has yet to release data on yields, Taiwanese carriers have reported 5-9% yoy increase in pax yields for October and November, which underscores an improving yield environment for Asia Pacific carriers
  • SIA’s Oct & Nov 17 load factors were the highest in eight years, underscoring strong demand.
  • Ongoing cargo recovery will aid profitability. Cargo load factors in Oct and Nov 17 were at the highest levels in 12 years. This coupled with a recovery in cargo yields should have led to strong 3QFY18 earnings.
  • Valuing SIA on an SOTP basis, with SIA-ex SIAEC valued at 0.9x FY18’s book value.

Share Price Catalyst

  • Event: December’s operating stats.
  • Timeline: Release of 3QFY18 results in early-Feb 18.





City Development – BUY (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 GLP privatises in Jan 18.

Share Price Catalyst

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





CD REIT – BUY (Vikrant Pandey/Loke Pei Hao)

  • CDREIT’s Singapore hotel operations (accounting for 57.2% of 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, 2019 and 2020 respectively (compared with 1,532 new rooms in 4Q17).
  • Its Singapore hotels saw a 0.8% increase in ADR to S$187 in 3Q17, despite a 2ppt drop in occupancy, resulting in a 1.4% decline in Singapore RevPAR.

Share Price Catalyst

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





GL – BUY (Edison Chen/Yeo Hai Wei)

  • BUY with SOTP-based target price of S$1.185.
  • Owner of prime hospitality assets, with over 4,700 hotel rooms in London.
  • Potential streamlining of assets, including disposal of non-core businesses.

Share Price Catalyst

  • Event: Sales of non-core businesses including Clermont Casino (UK) and Molokai Ranch, Hawaii Another potential catalyst is privatisation.
  • Timeline: Potential asset disposals in the next 6-12 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 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: Funds flow into laggards, including SingTel which offers a good dividend yield.
  • Timeline: Better-than-expected 3QFY18 results in Feb 18.





Wing Tai – BUY (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) 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 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.





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

  • Alcohol consumption is expected to recover in FY18 after the mourning period. The nonalcoholic beverage (NAB) segment achieved EBITDA breakeven in FY17, which is better than the initial guidance.
  • We have an SOTP-based target price of S$1.11. THBEV is trading at 19.4x 2018F PE, which is still lower than global average of 32.2x 2018F PE for spirits peers, 23.5x for beer companies and 27.4x for NAB companies.

Share Price Catalyst

  • Event: Recovery of 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 6 months.





Citic Envirotech – BUY (Edison Chen/Nicholas Leow)

  • Placement of 83.2m new shares at a 14.8% premium reaffirms our view that Citic looks undervalued.
  • Recent contract win of Rmb4.2b should provide investors with more assurance over its medium-term prospects and provide earnings visibility.

Share Price Catalyst

  • Event: Potentially 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 will benefit the company, which has an impressive track record and technology.









Singapore Research UOB Kay Hian | http://research.uobkayhian.com/ 2018-01-04
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 14.030 Same 14.030
BUY Maintain BUY 11.900 Same 11.900
BUY Maintain BUY 1.185 Same 1.185
BUY Maintain BUY 8.750 Same 8.750
BUY Maintain BUY 1.110 Same 1.110
BUY Maintain BUY 1.880 Same 1.880
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.

Advertisement



MOST TALKED ABOUT STOCKS / REITS OF THE WEEK



loading.......