BRC ASIA LIMITED (SGX:BEC)
BOUSTEAD SINGAPORE LIMITED (SGX:F9D)
CSE GLOBAL LTD (SGX:544)
RIVERSTONE HOLDINGS LIMITED (SGX:AP4)
JAPFA LTD. (SGX:UD2)
Singapore Strategy - 4Q19 Results Highlights & Analysts' Alpha Picks
- Beats/misses ratio stood at 2:1, the strongest since 2013 but sentiment overshadowed by Covid-19.
- The number of positive surprises was due to more conservative forecasts, given the long-drawn out nature of the China-US trade war.
- Sectors which had positive surprises were capital goods, commodities and semiconductor.
- Large-cap picks: CapitaLand Commercial Trust, Frasers Centrepoint Trust, CapitaLand Mall Trust, Sheng Siong, SingTel, ST Engineering, Wilmar, Venture Corp.
Singapore Stocks 4Q19 Results Highlights
Capital goods.
- SIA Engineering (SGX:S59) surprised positively from a tax write-back at associate, Sembcorp (SGX:U96) (strong gain from urban development residential completion in China), China Aviation Oil (SGX:G92) (stronger GPM, cost controls), CSE Global (SGX:544) (better O&G, lower tax), and ST Engineering (SGX:S63) (strong profit from munitions and aerospace).
- SIA Engineering - CGS-CIMB Research 2020-02-07: Earnings Beat Overshadowed By Pandemic.
- Sembcorp Industries - CGS-CIMB Research 2020-02-21: Utilities Assets Are Almost Free.
- China Aviation Oil - CGS-CIMB Research 2020-02-26: Stellar FY19 But Covid-19 Clips 2020’s Wings.
- CSE Global - CGS-CIMB Research 2020-02-27: 4Q19 Systems Forge Ahead!
- ST Engineering - CGS-CIMB Research 2020-02-24: Double-digit Earnings Growth Hard To Find.
- Sembcorp Marine (SGX:S51) missed on poor operating leverage.
Commodities.
- Planters (Wilmar (SGX:F34), First Resources (SGX:EB5) and Golden Agri Resources (SGX:E5H)) benefitted from the recent pick-up in CPO prices, while Golden Agri Resources also had better downstream performance and Fair Value gains.
Tech and manufacturing.
- AEM Holdings (SGX:AWX) and Frencken Group (SGX:E28) outperformed with a tight rein on costs; Venture Corp (SGX:V03) was in line but we were more excited over the management’s guidance of a stronger 2H20F supported by new product launch across sectors – life science, healthcare and wellness, instrumentation, and networking and communications.
- Covid-19 presented opportunities for Venture Corp as it could benefit from:
- companies seeking alternative manufacturing partners with facilities outside China to help them tide over the current situation — these additional customers or projects could provide new revenue streams for the company even after the resolution of the virus outbreak; and
- customers having an additional impetus (apart from the US-China trade war) to diversify their manufacturing locations, even if it is incrementally more expensive to do so.
Financials.
- OCBC Bank (SGX:O39) beat on the back of strong insurance contributions from Great Eastern Holdings (SGX:G07) and trading gains, while DBS (SGX:D05) was a slight miss due to significantly lower-than-expected trading income, and a dip in income from wealth.
REITs and developers.
- No major surprises, although CapitaLand Mall Trust (SGX:C38U) was boosted by the acquisition and opening of the refurbished Funan Mall. Mapletree North Asia Commercial Trust (SGX:RW0U) understandably underperformed as its Festival Walk asset (damaged in the HK protests) remains closed, affecting its portfolio.
- Frasers Property (SGX:TQ5) was boosted by its regional operations (CN, SG, TH), City Developments (SGX:C09) was below due to lower margin projects undertaken, while UOL Group (SGX:U14) was dragged down by lower residential and hotel revenue.
- As the property market in Singapore picked up, property brokers (APAC Realty (SGX:CLN) and PropNex (SGX:OYY)) performed relatively well, with PropNex above – due to higher margin marketing revenue.
Telco & Airlines
- StarHub (SGX:CC3)’s beat momentum continued this quarter on lower operating expenses and higher device sales. SingTel (SGX:Z74)’s results were still within despite lower Singapore and Optus profits, cushioned by better associate performance (except Bharti).
- Singapore Airlines (SGX:C6L) had a big turnaround in its 3QFY3/20 results, thanks to the strong performance of the mainline which delivered S$445m in EBIT, its highest since Oct-Dec 2007. However the challenging outlook from Covid-19 resulted in us slashing our EPS for FY20F-21F by 34-61% to factor in the negative demand impact, partially offset by lower jet fuel price assumptions.
Small caps.
- Japfa (SGX:UD2)’s poultry segment turned positive, reversing nine months of decline, while swine remains strong. BRC Asia (SGX:BEC) had stronger-than-expected margin expansion, while the pick-up in construction also benefitted dormitory provider Centurion Corp (SGX:OU8) (larger revenue base, economies of scale and lower tax).
- Yongnam (SGX:AXB) was below due to slower-than-expected progress billing. China Sunsine (SGX:QES) was still encumbered with lower ASPs while Riverstone Holdings (SGX:AP4) had higher tax expenses.
- Japfa Ltd - CGS-CIMB Research 2020-03-02: 4Q19 In APO We Trust.
- BRC Asia - CGS-CIMB Research 2020-03-03: Steel Looking Good.
- Centurion Corp - CGS-CIMB Research 2020-03-02: 4Q19 Results Beat; Structural Growth Intact.
- Construction & Materials - CGS-CIMB Research 2020-01-08: Sector Recovery Reaffirms BRC Buy.
- Riverstone Holdings - CGS-CIMB Research 2020-02-26: Robust Growth Ahead.
CGS-CIMB Analysts' Alpha Picks (2020-03-04)
2020 Singapore Stock Alpha Picks - Large Cap
2020 Singapore Stock Alpha Picks - Small Cap
See attached PDF report for details.
Continue to read -
LIM Siew Khee
CGS-CIMB Research
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Singapore Research Team
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-03-04
SGX Stock
Analyst Report
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SAME
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