SG Industrials - OCBC Investment 2018-09-13: Stick With The Winners

Singapore Industrial Sector - OCBC Investment Research | SGinvestors.io YANGZIJIANG SHIPBLDG HLDGS LTD SGX:BS6 COMFORTDELGRO CORPORATION LTD SGX:C52 SATS LTD. SGX:S58

SG Industrials - Stick With The Winners

  • Conglomerates/yards – Yangzijiang Shipbuildings, Sembcorp Industries outperform.
  • Transport – only ComfortDelGro is up YTD.
  • Increasing dividends – ComfortDelGro and SATS.


Conglomerates / Yards space – YZJ rebounds from trough

  • We are now reaching the 3rd quarter mark of this year and it is worthwhile to take stock of companies under our coverage so far. In our local conglomerates/yards space, all stocks (Keppel Corp (SGX:BN4), Sembcorp Industries (SGX:U96), Sembcorp Marine (SGX:S51), Yangzijiang Shipbuilding (SGX:BS6)) are down YTD, with more volatility seen for Yangzijiang and Sembcorp Marine.
  • Yangzijiang Shipbuilding is down 22% YTD, underperforming the rest, but if we look at the stock’s performance since mid Jul (close to trough for the market and prior to most companies’ 3Q results release), it has appreciated by 34%, outperforming most local stocks by a wide margin. At current levels, it is up 26% since our 8 Aug report, see “Yangzijiang Shipbuilding - All aboard!” and up 15% since our upgrade to BUY in mid Jun. That upgrade proved a little early, but likewise we have never professed to be perfect on market timing. Still, at current levels, we see further upside for the stock with a weak RMB and confidence that it will hit its new order target for this year.
  • Another out-performer since mid Jul is Sembcorp Industries which is up 14%, aided by a turnaround in India operations amidst a tightening power market.


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Transport-related names – Only ComfortDelgro is up YTD

  • Among transport-related names (ComfortDelgro (SGX:C52)Singapore Airlines (SGX:C6L)SATS (SGX:S58)SIA Engineering (SGX:S59)), all are down YTD except for ComfortDelgro, which is up 14%, aided by a rally in Apr-May. Aviation names SIA and SIA Engineering are the main under-performers YTD, down 10% or less. In general, this has been a rather stable sub-sector with relatively less volatility.
  • Investors looking for names with good dividend yields and some growth prospects over the long term as well could consider ComfortDelgro which offers a 4.6% yield at current levels, as well as SATS which has been increasing its dividends by S$0.01 per year since FY13. Based on last year’s S$0.18/share, there is a 3.6% yield at current levels.
  • Singapore Airlines and SIA Engineering also offer dividend yields of 4.2% and 4.4% based on last year’s dividend figures, but we note that there is relatively less consistency compared to ComfortDelgro and SATS which have been increasing their dividends over the years.





Low Pei Han CFA OCBC Investment Research | https://www.iocbc.com/ 2018-09-13
SGX Stock Analyst Report BUY Maintain BUY 1.230 Same 1.230
HOLD Maintain HOLD 2.500 Same 2.500
HOLD Maintain HOLD 5.390 Same 5.390



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