Analysts Top Picks - CGS-CIMB Research 2018-08-17: Singapore Market Strategy ~ Buckle Up

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Singapore Stocks Recommendation Analysts Top Stock Picks ASCENDAS REAL ESTATE INV TRUST SGX:A17U CDL HOSPITALITY TRUSTS SGX:J85 COMFORTDELGRO CORPORATION LTD SGX:C52 GENTING SINGAPORE LIMITED SGX:G13

Analysts Top Picks - Singapore Market Strategy ~ Buckle Up

CGS-CIMB Analysts’ Top Large Cap Picks for 2018

• Our current picks are: Ascendas REIT, CDL Hospitality Trusts, ComfortDelgro, Genting Singapore, Keppel Corp, Mapletree North Asia Commercial Trust, Sheng Siong, Sembcorp Industries, ST Engineering and UOB.
• Relatively safer small caps are: CSE Global, HMI, mm2 Asia and Riverstone.

Ascendas REIT (Rating: ADD, Target Price: S$2.89)

• Operating metrics continue to improve with positive rental reversions of 10.5% in 1QFY19 and contributions from new acquisitions and redevelopment activities.
• Ventured into UK with the purchase of 12 logistics properties. The trust will look to deepen presence in UK.
• Healthy gearing of 35.7% as at 1QFY19; 72.4% of its debt are on fixed rates, thus mitigating risks from interest rate hikes.
• ASCENDAS REAL ESTATE INV TRUST (SGX:A17U)  Ascendas Reit (SGX:A17U) Share Price  Ascendas Reit (SGX:A17U) Target Price  Ascendas Reit (SGX:A17U) Analyst Reports  Ascendas Reit (SGX:A17U) Corporate Actions  Ascendas Reit (SGX:A17U) Announcements  Ascendas Reit (SGX:A17U)Latest News  Ascendas Reit (SGX:A17U) Blog Articles

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CDL Hospitality Trust (Rating: ADD, Target Price: S$1.78)

• Earnings growth in FY19 will be driven by
  1. the completion of refurbishment of Orchard Hotel in 1Q19,
  2. reopening of the rebranded Maldives Resort by end- 2018, and
  3. the absence of booking cancellations due to the Trump-Kim event.
• Potential acquisition in Europe by year-end should also boost FY19F earnings.
• Singapore RevPAR should improve in tandem with the lower supply of hotel rooms in 2019 and stronger tourist arrivals. We see CDL as the proxy to the recovering hospitality sector in Singapore.
• CDL HOSPITALITY TRUSTS (SGX:J85)  CDL Hospitality Trust (SGX:J85) Share Price  CDL Hospitality Trust (SGX:J85) Target Price  CDL Hospitality Trust (SGX:J85) Analyst Reports  CDL Hospitality Trust (SGX:J85) Corporate Actions  CDL Hospitality Trust (SGX:J85) Announcements  CDL Hospitality Trust (SGX:J85)Latest News  CDL Hospitality Trust (SGX:J85) Blog Articles

ComfortDelgro (Rating: ADD, Target Price: S$2.75)

• Key catalysts include possible rail fare hike and strong recovery in taxi operations
• Robust balance sheet with S$298m in net cash, supporting further synergistic acquisitions ahead.
• Stock is trading at 16.2x forward P/E, close to its 10-year historical average of 15.8x
• COMFORTDELGRO CORPORATION LTD (SGX:C52)  ComfortDelGro (SGX:C52) Share Price  ComfortDelGro (SGX:C52) Target Price  ComfortDelGro (SGX:C52) Analyst Reports  ComfortDelGro (SGX:C52) Corporate Actions  ComfortDelGro (SGX:C52) Announcements  ComfortDelGro (SGX:C52) Latest News  ComfortDelGro (SGX:C52) Blog Articles

Genting Singapore (Rating: ADD, Target Price: S$1.44)

• At 7.9x forward EV/EBITDA, GENS is once again trading below its 5-year average which is unwarranted, in our view.
• We think the market is underestimating GENS’s sustainable EBITDA margins (FY18F: 47.8%), higher VIP market share (est. 1H18 of 49.4%) and significantly low trade receivables risk (1H18 of S$9.5m vs. 1H17’s S$29.7m).
• Dividends in 3Q/4Q and sustained EBITDA recovery are near-term catalysts. Successful bid for a Japan casino licence in 2021/2022F is a mid-to-long term catalyst.
• GENTING SINGAPORE LIMITED (SGX:G13)  Genting Singapore (SGX:G13) Share Price  Genting Singapore (SGX:G13) Target Price  Genting Singapore (SGX:G13) Analyst Reports  Genting Singapore (SGX:G13) Corporate Actions  Genting Singapore (SGX:G13) Announcements  Genting Singapore (SGX:G13) Latest News  Genting Singapore (SGX:G13) Blog Articles

Keppel Corp (Rating: ADD, Target Price: S$8.82)

• Key catalysts for KEP is q-o-q improvement in earnings from land sale in Tianjin Eco City as well as stronger operating margin from O&M and more launches in property. Key risk, however, is the unfavourable outcome from EIG litigation.
• Strong balance sheet could sustain our forecast DPS of S$0.32 (4.8% yield).
• The stock is trading c.1.15x CY18F P/BV, or close to -1 s.d. of its 5-year mean (1.4x).
• KEPPEL CORPORATION LIMITED (SGX:BN4)  Keppel Corp (SGX:BN4) Share Price  Keppel Corp (SGX:BN4) Target Price  Keppel Corp (SGX:BN4) Analyst Reports  Keppel Corp (SGX:BN4) Corporate Actions  Keppel Corp (SGX:BN4) Announcements  Keppel Corp (SGX:BN4) Latest News  Keppel Corp (SGX:BN4) Blog Articles

Mapletree North Asia Commercial Trust (Rating: ADD, Target Price: S$1.30)

• Beneficiary of the recovery in Hong Kong retail sales as it derives 64% of income from rental at Festival Walk. Shopper traffic and tenant sales at the property have risen 7.2% and 10.9% y-o-y respectively in 1QFY19.
• Enjoyed strong positive rental reversion of 14% for retail leases in 1QFY19, portfolio occupancy remains high at 99.6%.
• Balance sheet robust, with 90% of debt on fixed interest cost. Share price has retraced and is now trading at FY19 DPU yield of 6.7%.
• MAPLETREE NORTH ASIA COMM TR (SGX:RW0U)  Mapletree North Asia Commercial Trust (SGX:RW0U) Share Price  Mapletree North Asia Commercial Trust (SGX:RW0U) Target Price  Mapletree North Asia Commercial Trust (SGX:RW0U) Analyst Reports  Mapletree North Asia Commercial Trust (SGX:RW0U) Corporate Actions  Mapletree North Asia Commercial Trust (SGX:RW0U) Announcements  Mapletree North Asia Commercial Trust (SGX:RW0U)Latest News  Mapletree North Asia Commercial Trust (SGX:RW0U) Blog Articles

Sheng Siong (Rating: ADD, Target Price: S$1.18)

• Sheng Siong has seen swifter supermarket openings in FY18; post a slowdown in FY17. Trading at forward P/E of c.19.9x, SSG is still below its 3-year average mean despite its stable ROE of 25.4%. It has a yield of 3.4%
• It managed to lift its GPM higher to 27.3% in 2Q18.
• End-CY18F store count grows to 50 (vs. 44 at end-FY17); whilst open supermarket tender pipeline is still robust, with 6 more supermarket opportunities expected for the year. Stock boasts a strong balance sheet at net cash/share of 5S$cts as at 2Q18.
• SHENG SIONG GROUP LTD (SGX:OV8)  Sheng Siong (SGX:OV8) Share Price  Sheng Siong (SGX:OV8) Target Price  Sheng Siong (SGX:OV8) Analyst Reports  Sheng Siong (SGX:OV8) Corporate Actions  Sheng Siong (SGX:OV8) Announcements  Sheng Siong (SGX:OV8) Latest News  Sheng Siong (SGX:OV8) Blog Articles

Sembcorp Industries (Rating: ADD, Target Price: S$3.49)

• The bad news of a loss-making India is well known. We think downside risk is limited. SCI stub valuation is cheap at 0.3x CY18 P/BV (ROE: 7%).
• We think market has not priced in stronger UK contributions from mini-power plants, UKPR, which could add c.S$15m p.a. of recurring income to utilities.
• Key catalysts could include stronger-than-expected profitability from its India operations.
• SEMBCORP INDUSTRIES LTD (SGX:U96)  Sembcorp (SGX:U96) Share Price  Sembcorp (SGX:U96) Target Price  Sembcorp (SGX:U96) Analyst Reports  Sembcorp (SGX:U96) Corporate Actions  Sembcorp (SGX:U96) Announcements  Sembcorp (SGX:U96) Latest News  Sembcorp (SGX:U96) Blog Articles

ST Engineering (Rating: ADD, Target Price: S$3.80)

• STE benefits form a few structural tailwinds - heightened demand for cyber security and IOT solutions, upcycle engine MRO. This could continue to sustain strong order wins for the aerospace and electronics divisions.
• It is trading at 18x CY19 P/E, below its 5-year average of 21x.
• Key catalyst for the stock could come from stronger-than- expected order wins or sizeable earnings accretive M&A. Its balance sheet STE has net cash of S$148m at end- Jun. We think it could gradually adopt more aggressive capital management (gear up) to fund growth.
• SINGAPORE TECH ENGINEERING LTD (SGX:S63)  ST Engineering (SGX:S63) Share Price  ST Engineering (SGX:S63) Target Price  ST Engineering (SGX:S63) Analyst Reports  ST Engineering (SGX:S63) Corporate Actions  ST Engineering (SGX:S63) Announcements  ST Engineering (SGX:S63) Latest News  ST Engineering (SGX:S63) Blog Articles

United Overseas Bank (Rating: ADD, Target Price: S$31.00)

• UOB is a relative pick among the banks for its laggard valuation (vs. DBS), trading at 1.2x FY18F P/BV, below its own long-term mean of 1.3x.
• Strong CET 1 ratio of 14.5% also leaves room for strong dividends (yield of c. 4.5%).
• In a volatile market, UOB is relatively sheltered vs. peers due to its lower wealth management exposure that make up 5% of total income (DBS’s and OCBC’s average at 9%) and lower exposure to China/HK (15% of loan book vs. DBS’s 32% and OCBC’s 26%).
• UNITED OVERSEAS BANK LTD (SGX:U11)  UOB (SGX:U11) Share Price  UOB (SGX:U11) Target Price  UOB (SGX:U11) Analyst Reports  UOB (SGX:U11) Corporate Actions  UOB (SGX:U11) Announcements  UOB (SGX:U11) Latest News  UOB (SGX:U11) Blog Articles

CGS-CIMB Analysts’ Top Small Cap Picks for 2018 

CSE Global (Rating: ADD, Target Price: S$0.50)

• Currently trading at 12.4x CY18F P/E vs. our target of 13.5x (based on historical 5-year mean). It is net cash (2Q18: 4.1Scts/share), with a committed FY17F DPS of 2.75 Scts, implying c.6% dividend yield.
• In 2Q18, gross margin (GPM) edged up to 26.9% (vs. 1Q18 GPM of 26.8%). CSE expects GPM to stabilise at 26-27% in FY18F; enabling it to stay in earnings recovery mode.
• Order wins will be steady with continued “flow contracts”. In the longer term, the collaboration with Serba Dinamik could lead to downstream O&G, power and utilities contracts from the Middle East and Malaysia.
• CSE GLOBAL LTD (SGX:544)  CSE Global (SGX:544) Share Price  CSE Global (SGX:544) Target Price  CSE Global (SGX:544) Analyst Reports  CSE Global (SGX:544) Corporate Actions  CSE Global (SGX:544) Announcements  CSE Global (SGX:544) Latest News  CSE Global (SGX:544) Blog Articles

HMI (Rating: ADD, Target Price: S$0.80)

• We like HMI for its quality hospital assets (MMC and RSH) in Malaysia, which are well-positioned to ride on increasing patient load, higher revenue intensity and medical tourism.
• HMI is also a cheaper regional healthcare play at 20x CY19 P/E and 13x CY19 EV/EBITDA, vs peers’ average of 27x CY19 P/E and 15x CY19 EV/EBITDA.
• Faster ramp-up of its StarMed acquisition in Singapore is a key catalyst.
• HEALTH MANAGEMENT INTL LTD (SGX:588)  Health Management International (SGX:588) Share Price  Health Management International (SGX:588) Target Price  Health Management International (SGX:588) Analyst Reports  Health Management International (SGX:588) Corporate Actions  Health Management International (SGX:588) Announcements  Health Management International (SGX:588) Latest News  Health Management International (SGX:588) Blog Articles

mm2 Asia (Rating: ADD, Target Price: S$0.72)

• We like mm2 as a proxy for growing media and entertainment business in Asia, given its extensive presence across the entire value chain, which include cinema assets, events production (UnUsUal) and post- production businesses (Vividthree).
• Key near-term catalysts are possible spin-off of its Vividthree subsidiary, which could set it off on a stronger earnings trajectory, and strategic partnerships.
• At current valuation of 14x P/E, we think mm2’s growth prospects and potential synergies may have been overlooked.
• MM2 ASIA LTD. (SGX:1B0)  MM2 (SGX:1B0) Share Price  MM2 (SGX:1B0) Target Price  MM2 (SGX:1B0) Analyst Reports  MM2 (SGX:1B0) Corporate Actions  MM2 (SGX:1B0) Announcements  MM2 (SGX:1B0) Latest News  MM2 (SGX:1B0) Blog Articles

Riverstone Holdings (Rating: ADD, Target Price: S$1.28)

• Annual glove capacity to grow 37% from the current 7.6bn to 10.4bn by end-FY19F.
• Beneficiary of strengthening US$ against RM as its gloves sales are mostly sold in US$.
• Laggard behind its Malaysian gloves peers, trading at 14.5x FY19 P/E at c.40% discount to Malaysian peers’ average of 23.8x.
• RIVERSTONE HOLDINGS LIMITED (SGX:AP4)  Riverstone Holdings (SGX:AP4) Share Price  Riverstone Holdings (SGX:AP4) Target Price  Riverstone Holdings (SGX:AP4) Analyst Reports  Riverstone Holdings (SGX:AP4) Corporate Actions  Riverstone Holdings (SGX:AP4) Announcements  Riverstone Holdings (SGX:AP4) Latest News  Riverstone Holdings (SGX:AP4) Blog Articles

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• Trends From 2Q18 - Singapore Market Strategy ~ Buckle Up

LIM Siew Khee CGS-CIMB Research | Singapore Research Team CGS-CIMB Research | https://research.itradecimb.com/ 2018-08-17

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