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Top Stock Ideas - Maybank Kim Eng 2019-04-17: Singapore Market Monitor ~ Foggy With A Hint Of Sunshine

Top Stock Ideas - Singapore Market Monitor ~ Maybank Kim Eng Research | SGinvestors.io UNITED OVERSEAS BANK LTD (SGX:U11) DBS GROUP HOLDINGS LTD (SGX:D05) NETLINK NBN TRUST (SGX:CJLU) MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) SINGAPORE TECH ENGINEERING LTD (SGX:S63) CDL HOSPITALITY TRUSTS (SGX:J85) FRASERS CENTREPOINT TRUST (SGX:J69U) JAPFA LTD. (SGX:UD2) BUMITAMA AGRI LTD. (SGX:P8Z) VALUETRONICS HOLDINGS LIMITED (SGX:BN2) SHENG SIONG GROUP LTD (SGX:OV8) HI-P INTERNATIONAL LIMITED (SGX:H17)

Singapore Market Monitor ~ Top Stock Ideas

  • Most of our top stock picks discussed below lie in our suggested Overweight and Neutral sectors.
  • The two stocks in our top picks list where we have a suggested Underweight on the sector are NetLink NBN Trust, which is an owner of passive telecom infrastructure and not exposed to the operating environment pressure like the incumbents, and Valuetronics, which has been a massive laggard relative to the rest of the technology sector.



Singapore Large Caps Top Picks


UNITED OVERSEAS BANK LTD (UOB, SGX:U11) (Target Price SGD29.71):

  • Increasing contribution from overseas operations will offset slower domestic growth, while lagging NIMs should see an inflection point going forward from re-pricing loan yields and better liquidity management.
  • UOB's track record of conservative capital and provisioning management puts the group in a solid footing to absorb shocks and navigate a volatile operating environment.

DBS GROUP HOLDINGS LTD (SGX:D05) (Target Price SGD29.56):

  • Key post-GFC structural changes, including:
    1. a larger focus on interest income; and
    2. lower dependence on volatile trading income has improved DBS' earnings quality and visibility.
  • DBS's strong franchise in low cost deposits in Singapore opens up potential for upside surprise on NIMs while their heavy IT investments should provide a competitive advantage in the medium term.

NETLINK NBN TRUST (SGX:CJLU) (Target Price SGD0.93):

  • With over 80% of revenues based on a guaranteed return on a regulated asset base off a residential access fibre monopoly and gearing at 15-17%, NetLink Trust’s payout of 100% cash available for distribution is a relative safe harbor in turbulent times. Adding to this is short-term earnings growth fuelled by cable migration to its fiber network.

MAPLETREE INDUSTRIAL TRUST (SGX:ME8U) (Target Price SGD2.20):

  • Mapletree Industrial Trust has visible growth drivers from its:
    1. AEI at 30A Kallang Place;
    2. recently completed Sunview 1 BTS data centre; and
    3. recent acquisition of 18 Tai Seng from its sponsor.
  • Its US data-centres should also see rising contributions in FY20. Low 34.7% gearing and clear acquisition-growth potential could provide upside to our 3-year 4.5% DPU CAGR forecast.

SINGAPORE TECH ENGINEERING LTD (ST Engineering, SGX:S63) (Target Price SGD4.25):

  • After some lackluster years with tough market conditions for three of ST Engineering's four divisions (Aerospace, Land Systems, Marine) and one-off restructuring costs, the outlook appears much brighter since 2018 with a cyclical recovery in Aerospace and new investments in Electronics, Land Systems in areas of robotics, Smart City solutions and SatCom holding exciting growth prospects.


Singapore Small-Mid Caps (sub USD2b market cap) Top Picks


CDL HOSPITALITY TRUSTS (SGX:J85) (Target Price SGD1.80):

  • Our top hospitality sector pick, as its scale and liquidity render it a good proxy for a sustained recovery in Singapore’s hospitality sector. Overseas expansion has also gained traction with a continued push into Europe supported by positive carry from low funding costs and low gearing.

FRASERS CENTREPOINT TRUST (SGX:J69U) (Target Price SGD2.55):

  • Frasers Centrepoint Trust has visible growth drivers and potential acquisition catalysts. Gearing of 28.8% and SGD800m of debt headroom should support acquisitions. Sponsor Frasers Property (SGX:TQ5)'s pipeline assets – Northpoint City’s South Wing and 33% interest in Waterway Point - could further strengthen its suburban mall footprint.

JAPFA LTD. (SGX:UD2) (Target Price SGD1.05):

  • Japfa will continue to benefit from long term secular consumption growth trends with operations in populous, high-growth emerging economies of Indonesia, Vietnam, Myanmar, India, and China where per capita protein consumption is still low as is penetration levels of industrialised farming practices which can materially lower unit production costs.

BUMITAMA AGRI LTD. (SGX:P8Z) (Target Price SGD0.97):

  • We expect 14% EPS growth in FY19 underpinned by higher output and better prices and the company’s low cost of production.
  • Bumitama Agri is trading near 1SD below historical mean. We remain positive on the medium-to-long term industry outlook as there has been an overall slowdown in new planting and the need to accelerate replanting some of the older trees which will likely slow down FFB growth forecasts in 2020-21.

VALUETRONICS HOLDINGS LIMITED (SGX:BN2) (Target Price SGD1.05):

  • A laggard in the Singapore tech sector YTD, due to overhang from risks of further allocation losses as a result of the trade war. However, we believe such risks are already priced in. Valuetronics trades at attractive valuations, with 6-7% FY19-21E dividend yields, and 4x FYMar19E EV/EBITDA. Balance sheet is strong with no debt, and cash accounts for over 40% of market cap.
  • Catalysts could come from clarity of ASEAN production plans to insulate itself from trade-war related customer/ allocation losses in ICE segment.


Key Contrarian SELL Recommendations


SHENG SIONG GROUP LTD (SGX:OV8) (Target Price SGD0.95):

  • Singapore's second-largest supermarket will not be immune to a slowdown in consumer spending amid economic deceleration forecast by MKE Economics team. We expect 8.4% y-o-y revenue growth in FY19E from higher-than-normal 10 new stores opening in 2018, but believe trepid SSS-contributions and smaller basket values will be a drag on Sheng Siong Group's subsequent revenue growth.
  • See report: Sheng Siong Group - Battle Of The Brands; Sheng Siong Group - No Mood To Shop.

HI-P INTERNATIONAL LIMITED (SGX:H17) (Target Price SGD1.22):

  • Despite a 16% correction in Hi-P's share price since our downgrade to SELL last week (see report: Hi-P International - Take Profit), fundamentally, we believe there could be further downside. To justify current Hi-P's share price, our ROE-g/COE-g methodology suggests market is pricing in ~12% FY18- 21E earnings CAGR, which may be hard to achieve in current challenging environment.
  • Management has maintained flat y-o-y earnings guidance, while we estimate FY18-21E EPS CAGR of 4%.
  • Risks to our view include possible capital market activity and material contract wins not yet factored in by management's guidance.




See also



Singapore Sector Weighting Recommendations 






Neel Sinha Maybank Kim Eng Research | Lai Gene Lih Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2019-04-17
SGX Stock Analyst Report BUY MAINTAIN BUY 29.710 SAME 29.710
BUY MAINTAIN BUY 29.560 SAME 29.560
BUY MAINTAIN BUY 0.930 SAME 0.930
BUY MAINTAIN BUY 2.250 SAME 2.250
BUY MAINTAIN BUY 4.250 SAME 4.250
BUY MAINTAIN BUY 1.850 SAME 1.850
BUY MAINTAIN BUY 2.600 SAME 2.600
BUY MAINTAIN BUY 1.050 SAME 1.050
BUY MAINTAIN BUY 0.970 SAME 0.970
BUY MAINTAIN BUY 1.050 SAME 1.050
SELL MAINTAIN SELL 0.950 SAME 0.950
SELL MAINTAIN SELL 1.220 SAME 1.220


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