Singapore Stock Alpha Picks 2018 April
SHENG SIONG GROUP LTD
OV8.SI
CDL HOSPITALITY TRUSTS
J85.SI
CITIC ENVIROTECH LTD.
CEE.SI
CITY DEVELOPMENTS LIMITED
C09.SI
DBS GROUP HOLDINGS LTD
D05.SI
KEPPEL CORPORATION LIMITED
BN4.SI
OVERSEA-CHINESE BANKING CORP
O39.SI
WING TAI HLDGS LTD
W05.SI
SINGTEL
Z74.SI
Singapore Stock Alpha Picks: Selectively Emphasising Defensives. Added Sheng Siong.
- We add Sheng Siong to boost the portfolio’s defensive qualities.
WHAT’S NEW
A mixed March.
- The FSSTI ended March 2018 on a negative note as it retraced 2.6% m-o-m, dragged by fears of a trade war and rising interest rates.
- Except for Keppel Corp, DBS and Wing Tai, most of our alpha picks outperformed the FSSTI in March, with positive absolute returns for City Developments (+1.9%) and CD REIT (+1.8%).
ACTION
Adding in Sheng Siong for defensiveness.
- We add Sheng Siong to our alpha picks as we find its defensive characteristics compelling. The stock has been a laggard over the past year but we expect growth to pick up in 2018 from four new store openings. We also find Sheng Siong’s FY18F dividend yield of 3.6% compelling.
- We also reiterate our BUY call on Singtel as the stock has been a laggard (-13.5% over the last 12 months) but displays high defensiveness owing to its geographical diversification, strong cash flows and solid dividend yield.
Sheng Siong – BUY (Nicholas Leow)
- Great start to 2018 with four new stores, which will add 32,100sf of retail space. Shift to new and smaller outlets should be accretive to store efficiency.
- End of irrational bidding points to potential new store wins in 2018. Healthy supply of supermarkets for tender on Place2Lease.com with almost 20 new supermarket outlets up for bidding over the next six months.
- Room for further gross margin expansion due to more favourable fresh food sales mix and volume discounts from brand owners.
- SHENG SIONG GROUP LTD (OV8.SI) Sheng Siong Share Price Sheng Siong Target Price Sheng Siong Analyst Reports Sheng Siong Corporate Actions Sheng Siong Announcements Sheng Siong Latest News Sheng Siong Blog Articles
Share Price Catalyst
- Event: New store wins and uptick in same-store sales growth.
- Timeline: 3-6 months.
OCBC – BUY (Jonathan Koh)
- Significant improvement in CET-1 CAR in 4Q17. OCBC is well capitalised with fully loaded CET-1 CAR improving 1.1ppt q-o-q to 13.1% in 4Q17 due to the implementation of internal ratings-based approach (IRBA) for Bank of Singapore and reduced deduction to capital for Great Eastern.
- IPO for Great Eastern Life Malaysia a key catalyst. Management will evaluate the divestment of a 30% stake in Great Eastern Life Malaysia through an IPO or trade sale.
- Great Eastern has to submit its plan to Bank Negara by Jun 18 and execute the plan likely in 2H18. Proceeds from the divestment could be reinvested to further propel growth in its core commercial banking business.
- OVERSEA-CHINESE BANKING CORP (O39.SI) OCBC Bank Share Price OCBC Bank Target Price OCBC Bank Analyst Reports OCBC Bank Corporate Actions OCBC Bank Announcements OCBC Bank Latest News OCBC Bank Blog Articles
Share Price Catalyst
- Event: Impending IPO for Great Eastern Life Malaysia in 2H18.
- Timeline: Six months.
DBS – BUY (Jonathan Koh)
- Strong execution. Management continues to execute well, exceeding our 4Q17 expectations on NIM expansion and moderating credit cost.
- Clarity in dividend policy. We estimate DBS’ dividend payout will rise to 57% for 2018 with a concurrent improvement in ROE to 11.1% by returning surplus capital. The new dividend policy should also help ease investors’ concern of an overly aggressive bid to acquire another regional bank.
- DBS GROUP HOLDINGS LTD (D05.SI) DBS Share Price DBS Target Price DBS Analyst Reports DBS Corporate Actions DBS Announcements DBS Latest News DBS Blog Articles
Share Price Catalyst
- Event: Further rate hikes leading to higher NIMs.
- Timeline: 3-6 months.
Keppel Corp – BUY (Foo Zhi Wei/Andrew Chow)
- Infrastructure and investments are expected to drive growth in the next few quarters. Recurring profits will be underpinned by rising AUM at Keppel Capital.
- Keppel is the cleanest proxy to the O&M recovery, with solid financials (2018F net gearing of 55%)
- KEPPEL CORPORATION LIMITED (BN4.SI) Keppel Corp Share Price Keppel Corp Target Price Keppel Corp Analyst Reports Keppel Corp Corporate Actions Keppel Corp Announcements Keppel Corp Latest News Keppel Corp Blog Articles
Share Price Catalyst
- Event: Positive newsflow from contract wins and further de-leveraging from O&G assets.
- Timeline: 6-12 months.
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 more than 2,090 attributable units.
- CITY DEVELOPMENTS LIMITED (C09.SI) City Developments Share Price City Developments Target Price City Developments Analyst Reports City Developments Corporate Actions City Developments Announcements City Developments Latest News City Developments Blog Articles
Share Price Catalyst
- Event: Upward re-rating of RNAV by consensus on rising asset prices. Positive datapoints on residential property.
- Timeline: Positive newsflow on Amber Park launch and projects within its vicinity in 2018.
CD REIT – BUY (Vikrant Pandey/Loke Pei Hao)
- Our target price is S$1.95, which assumes terminal growth of 2.5%.
- CDREIT’s Singapore hotels could benefit from a recovery in corporate travel, Chinese visitor growth and tight supply pipeline. Hotel room supply is limited beyond 2017, with only 769, 1,664 and 392 rooms coming on stream in 2018-20 respectively (2017: 2,868 new rooms).
- Its’ Singapore hotels saw a 1.2% y-o-y increase in ADR to S$186 in 4Q17 despite a 0.1ppt drop in occupancy, resulting in 1.1% y-o-y increase in Singapore RevPAR.
- CDL HOSPITALITY TRUSTS (J85.SI) CDL Hospitality Trust Share Price CDL Hospitality Trust Target Price CDL Hospitality Trust Analyst Reports CDL Hospitality Trust Corporate Actions CDL Hospitality Trust Announcements CDL Hospitality TrustLatest News CDL Hospitality Trust Blog Articles
Share Price Catalyst
- Event: Positive datapoints on visitor arrivals, ALOS, ADR, RevPAR and supply pipeline.
- Timeline: 1H18.
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$4.40 (6.25% required rate of return, 1.5% terminal growth).
- SINGTEL (Z74.SI) SingTel Share Price SingTel Target Price SingTel Analyst Reports SingTel Corporate Actions SingTel Announcements SingTel Latest News SingTel Blog Articles
Share Price Catalyst
- Event: Fund flow into laggards and defensive stocks, including Singtel which offers good dividend yield.
- Timeline: 3-6 months.
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 0.52x 2018F P/B (lowest within our coverage) and a deep 41% discount to RNAV.
- With net cash of S$54.9m, Wing Tai is well positioned to deploy its sizeable debt headroom of S$1.6b (assuming comfortable net gearing level of 50%). We believe Wing Tai will further deepen its footprint in Singapore, Malaysia (post privatisation completion) and Australia.
- WING TAI HLDGS LTD (W05.SI) Wing Tai Share Price Wing Tai Target Price Wing Tai Analyst Reports Wing Tai Corporate Actions Wing Tai Announcements Wing Tai Latest News Wing Tai Blog Articles
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$1.6b acquisition headroom.
- Timeline: Potential 6-9 months for landbank acquisition or launch of its Serangoon North Avenue 1 site.
Citic Envirotech – BUY (Edison Chen/Nicholas Leow)
- Slight disappointment in 4Q17 results primarily due to timing issue on recognition of its Lanzhou mega project.
- Placement of 83.2m new shares at a 14.8% premium reaffirms our view that Citic Envirotech looks undervalued.
- Contract wins of Rmb4.2b should provide investors more assurance over its mediumterm prospects as well as earnings visibility.
- CITIC ENVIROTECH LTD. (CEE.SI) Citic Envirotech Share Price Citic Envirotech Target Price Citic Envirotech Analyst Reports Citic Envirotech Corporate Actions Citic Envirotech Announcements Citic Envirotech Latest News Citic Envirotech Blog Articles
Share Price Catalyst
- Event: Potentially more contract wins and share buybacks by CEL.
- 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/
2018-04-03
UOB Kay Hian
SGX Stock
Analyst Report
1.10
Up
1.060
1.950
Same
1.950
1.060
Same
1.060
14.030
Same
14.030
30.400
Same
30.400
9.100
Same
9.100
14.950
Same
14.950
2.780
Same
2.780
4.400
Same
4.400
* Alpha Picks denotes a timeframe of 1-3 months and not UOBKH’s usual 12-month investment horizon for stock recommendation.
