DBS GROUP HOLDINGS LTD
D05.SI
CITY DEVELOPMENTS LIMITED
C09.SI
THAI BEVERAGE PUBLIC CO LTD
Y92.SI
BEST WORLD INTERNATIONAL LTD
5ER.SI
MM2 ASIA LTD
43D.SI
Singapore Strategy - Bright spots here & there, amidst the misses
- 1Q season was poor. More than two companies missed expectations for every one that beat. Among index sectors, banks and telcos did relatively better.
- The problem is revenue. Banks’ provisions are not flaring but revenue generation is tough. Retail sales and hotel rates are softening. O&M orders are not being paid.
- Preferred index names: DBS, CIT and THBEV. Small-cap: BEST, MM2, SARINE
Banks and telco
- Banks’ asset quality deteriorated slightly, but provisions were less of a challenge than market concerns suggested. Instead, it was the effect of weaker revenue drivers as loan growth disappeared and market-related fees proved difficult. DBS is the pick of the three, with new bancassurance revenues providing topline tailwind.
- Main concern for telcos is the fourth telco and we still expect M1 and Starhub to lose out. The trio is struggling to hold up Singapore mobile and cable TV revenue. Only SingTel is doing better on its better-performing Optus and associates.
Property & REITs
- Developers saw slowing residential, hotel revenues. Delivery on overseas engines and dependence on investment properties recurrent earnings are key to earnings. Singapore home sales trends are stable at 8k-9k p.a. run-rate. We like CIT and UOL.
- REITs we like are KDC, MAGIC and KREIT, less crowded names after larger REITs ran up (Mar) on Yellen’s dovish comments. Our order of preference is office, retail, industrial and last, hospitality; the last three had negative data points in the 1Q. We are overweight property and REITs, as valuations provide downside protection.
Conglomerates, industrial, transport
- 1Q profits for KEP/SMM have halved yoy, on further deferral/non-payment of Brazil contracts and others. Previously perceived low-risk clients are now turning risky. Despite steep underperformance, we believe it is too early to take a constructive view. We prefer STE (MRO recovery, cyber security contracts) and SATS (recovering tourism numbers) as there are at least some positive trends here.
- SIA disappointed as falling yields caught up with lower costs. SMRT has rising rail losses. Prefer SPOST as logistics and e-commerce sales traction is showing up, negating the ills of higher costs; also, clarity of new management can be a catalyst.
Gaming, healthcare, consumer, plantations
- GENS had a miss due to bad debt charges doubling qoq, but valuations do look attractive. In contrast, Raffles Medical sees profit growth slowing (due to rising costs) and continues to outperform. We have a non-consensus Reduce on Raffles Medical.
- The consumer name to highlight was Thai Beverage, it had a huge beat on sustained beer market share gains and rising sales from all other divisions. Companies with Indonesia sales are turning around. Plantations were mixed, we downgraded Wilmar (previous top pick) as share price has done well and forward guidance is poor.
Our conviction ideas in Singapore
- Our large-cap top picks are DBS,CIT,SATS,STE,THBEV and UOL,with OCBC and SIA removed.
- New small-cap conviction names are BEST and MM2. IP is removed.
CIMB's Top Picks for 2016
Kenneth NG CFA
CIMB Securities
|
http://research.itradecimb.com/
2016-05-17
CIMB Securities
SGX Stock
Analyst Report
17.96
Same
17.96
10.32
Same
10.32
0.92
Same
0.92
1.12
Same
1.12
0.70
Same
0.70
