Singapore Strategy - CIMB Research 2018-03-05: Earnings Bubbling ~ Alpha Picks

Singapore Strategy - CIMB Research 2018-03-05: Earnings Bubbling Singapore Stocks Picks March 2018 AEM HOLDINGS LTD AWX.SI MM2 ASIA LTD. 1B0.SI YONGNAM HOLDINGS LIMITED AXB.SI CHINA SUNSINE CHEM HLDGS LTD. CH8.SI UOL GROUP LIMITED U14.SI

Singapore Strategy - Earnings Bubbling ~ Alpha Picks

  • Our bottom-up target for FSSTI now stands at 3,705, based on 14.2x 2018F P/E (+0.5 10-year mean) vs. 10% y-o-y EPS growth for 2018F.
  • Our Alpha picks are SMM, VMS, UOL, GENS and STE (big caps); and AEM, China Sunsine, Yongnam and mm2 (small caps).

Alpha picks 

  • Our picks are based on
    1. earnings growth,
    2. share price correction, and
    3. valuations.
  • With that, our Alpha picks are SMM, VMS, UOL, GENS, STE among the big caps; and AEM, China Sunsine, Yongnam and mm2 among the small caps. 
  • We removed Sunningdale (forex uncertainty and lower ASPs) and Keppel Corp (noises from various arbitrations).

Our Alpha picks (big caps) 

Sembcorp Marine (ADD, Target Price: $3.01) 

ST Engineering (ADD, Target Price: $3.80) 

Genting Singapore (ADD, Target Price: $1.49) 

  • GENTING SINGAPORE PLC (G13.SI)  Genting Singapore Share Price  Genting Singapore Target Price  Genting Singapore Analyst Reports  Genting Singapore Corporate Actions  Genting Singapore Announcements  Genting Singapore Latest News  Genting Singapore Blog Articles
  • Whilst GENS's 4Q17 adjusted EBITDA was lower on a sequential basis (-20.2% qoq), largely due to bonus paid to employees and slightly higher commissions for the VIP business, we believe the recent selldown of its share price (c.10% from 23 Feb) is overdone. The stock is now at levels seen before the turnaround in Singapore VIP volume growth which kick-started towards 2H17. 
  • We believe Singapore VIP volumes could grow; given the high correlation (~c.90%) to Macau VIP baccarat gross gaming revenue (GGR), our regional gaming analyst foresees further growth in FY18F. 
  • GENS was cautious in 2017 with regards to VIP credit, hence could have missed out on market share gain (estimated CY17 VIP volume market share of 37%). But as it aims to ease credit policies, a pickup in CY18F VIP market share could occur. 
  • The stock current trades at 8.8x CY19F EV/EBITDA, close to -1 s.d. to its 5-year average. We view this as unwarranted given its improved EBITDA margins. Maintain Add and Target Price of S$1.49 based on 12x CY19F EV/EBITDA (slightly above +0.5 s.d. of its 5-year mean).

Venture Corporation (ADD, Target Price: $30.81) 

UOL Group (ADD, Target Price: $9.67) 

Our Alpha picks (small caps caps) 

AEM Holdings Ltd (ADD, Target Price: $8.19) 

China Sunsine Chemical Holdings (ADD, Target Price: $1.62) 

mm2 Asia (ADD, Target Price: $0.76) 

Yongnam Holdings (ADD, Target Price: $0.57) 

LIM Siew Khee CIMB Research | CIMB Research Team CIMB Research | 2018-03-05
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 8.190 Same 8.190
ADD Maintain ADD 0.760 Same 0.760
ADD Maintain ADD 0.570 Same 0.570
ADD Maintain ADD 1.620 Same 1.620
ADD Maintain ADD 9.670 Same 9.670
BUY Maintain BUY 31.880 Same 31.880