Today’s Focus
�� UOB - Downgrade to HOLD on limited upside to target
price of S$22.50
�� SMRT - Worst seen, but recovery pace uncertain. Upgrade
to HOLD
�� Venture - Nascent recovery, downgrade to HOLD on
limited upside to target price of S$7.80
Ex-lower tax rate, 1Q14 earnings for UOB were inline; trends
were contrary to peers. Net interest margin (NIM) fell 1bps,
loan growth y-o-y was below peers; non-interest income was
lower q-o-q and y-o-y. NIM pressure imminent from regional
operations and would likely prevail for the rest of the year.
Loan growth guidance remains at high single digit. Downgrade
to HOLD on limited upside to target price, which is unchanged
at S$22.50. Near-term pressure rests on its ASEAN-related
operations; longer term, UOB may lag peers with a smaller
Greater China exposure.
OCBC’s 1Q14 earnings beat our/street estimates on higher
NIM, strong loan growth and higher trading income. Only
Malaysian market is seeing pressure but with minimal impact to
the group. Loan growth guidance still at low double digits; NIM
improvement is possible from wider loan spreads. Maintain
BUY and S$12.40 target price.
SMRT’s FY14 earnings were below ours but within consensus’
expectations. Net profit dropped 26% y-o-y to S$61.9m, from
S$83.3m a year ago on the back of higher operating costs
(+7%) and interest expenses (+48%) vis-à-vis revenue growth
of just 4% to S$1.16bn. 4Q14, however, improved
sequentially, with earnings growing 19% q-o-q to S$16.9m,
helped by stabilising costs. There is no clear explanation on
recent surge in share price; it is pre-mature to conclude that a
new rail framework is a major positive in absence of details.
We have trimmed our FY15F earnings down by 5% on higher
costs, offset by higher rental contribution, but raised FY16F by
6% to account for the full year contribution from the Sports
Hub’s retail mall. We raised our target price to S$1.13 as we
roll our valuation forward to FY15F coupled with our earnings
adjustment. While we believe earnings should have seen its
worst in FY14, the pace of recovery is still highly uncertain. In
view of limited downside, we upgrade to HOLD.
US Indices Last Close Pts Chg % Chg
Dow Jones �� 16,558.9 23.5 0.1
S&P �� 1,883.7 5.4 0.3
NASDAQ �� 4,127.5 23.9 0.6
Regional Indices
ST Index �� 3,264.7 27.0 0.8
ST Small Cap �� 543.7 (0.4) (0.1)
Hang Seng �� 22,134.0 (319.9) (1.4)
HSCEI �� 9,779.7 (103.2) (1.0)
HSCCI �� 4,167.9 (0.3) (0.0)
KLCI �� 1,871.5 12.2 0.7
SET �� 1,414.9 2.6 0.2
JCI �� 4,840.1 20.5 0.4
PCOMP �� 6,707.9 71.5 1.1
KOSPI �� 1,961.8 (3.0) (0.2)
TWSE �� 8,791.4 (80.7) (0.9)
Nikkei �� 14,485.1 196.9 1.4
STI Index Performance
Singapore
1,000
2,000
3,000
4,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
100-Day MA
Index
STI
Total Market cap (US$bn) 608
Total Daily Vol (m shrs) 1,856
12m ST Index High 3,454
12m ST Index Low 2,960
Source: Bloomberg Finance L.P.
Stock Picks – Large Cap
Rec’n Price (S$)
30 Apr
Target Price
(S$)
ComfortDelgro Buy 2.120 2.19
Global Logistic Properties Buy 2.850 3.31
Keppel Corp Buy 10.530 12.60
Stock Picks – Small Cap
Rec’n Price (S$)
30 Apr
Target Price
(S$)
Goodpack Buy 2.400 2.60
China Merchants Buy 0.965 1.32
Pacific Radiance Ltd Buy 1.065 1.20
Nam Cheong Buy 0.355 0.46
Centurion Corporation Buy 0.715 0.86
Source: DBS Bank
Singapore
Wired Daily
Page 2
Results for Venture Corporation in line; margins recovering.
New programmes and customers are expected to lead
sequential improvement ahead. Balance sheet remains
healthy. In view of limited upside to our unchanged target
price of S$7.80, we downgrade rating to HOLD for now.
Yangzijiang reported a stellar set of 1Q results on the back
of an impressive shipbuilding margin of 24% and held-tomaturity
(HTM) income. The upbeat YTD contract wins of
US$1.1bn has lifted Yangzijiang’s orderbook to US$5.2bn.
Though two mid-water semi-submersible orders with
Primepoint were cancelled due to financing constraints,
order wins may beat guidance of US$1.5bn-2.0bn this year.
The emphasis is on delivery of on time on budget quality
vessels. Maintain BUY; target price raised to S$1.55 (Prev S$
1.45) following earnings revision for preferential tax rate.
Cosco Corp reported better than expected 1Q14 results due
largely to lower depreciation. Concerns over execution of
diversified vessel types and overhang from drillship saga
remain. Slow order flow and under utilisation of yards
would further delay recovery. Maintain FULLY VALUED and
S$0.69 target price.
Indofood Agri Resources reported 1Q14 core earnings of
Rp96.2bn (ex. translational FX gains), significantly below our
Rp288-300bn expectations. Slower-than-expected ramp up
in downstream sales volume, delay in cooking oil price
adjustments and shift in seeds sales caused profitability to
drop. Unrealized downstream profit of c.Rp134 bn, price
hikes, catch up in seed sales yet to be booked in 2Q14.
Maintain HOLD and S$1.17 target price. Expect 2Q14 profit
to make up for this quarter’s weakness.
1Q14 results for Soilbuild Business Space REIT beat IPO
forecasts but in line with our expectations. Gross revenues
and net property income were 3.9% and 5.3% higher at
S$16.8m and S$14.2m respectively. Minimal lease expiry for
2014. Maintain BUY and target price S$0.89. SBREIT
currently offers investors yields of 7.8%-8.4%, which is
higher than its industrial peers.
SingTel 4Q14F results preview. Our analyst expects flat
profit despite bumper Bharti. 4Q14F core profit of S$985m
(-2%y-o-y) may barely meet consensus estimates. 50%
profit growth at Bharti, and single-digit profit growth at
other regional associates in FY15F, may lead to 6% profit
growth at SingTel. Maintain HOLD with revised target price
of S$3.80 (Prev S$ 3.75). Based on current market value of
listed associates, SingTel is trading at ~3% premium.
LottVision proposed placement of 10.5m new shares at the
issue price of S$0.019 per share. The subscription price
represents a discount of approximately 9.5% to the last
volume weighted average price. The estimated net proceed
of S$190,000 will be used for business investments and
working capital purposes.
In property news, a commercial and residential site next to
Potong Pasir MRT Station launched for sale on the
confirmed list of the Government Land Sales Programme is
expected to draw four to eight bids. Property consultants'
forecasts for the top bid varied from $650 to $900 per
square foot of potential gross floor area.
Retail rents of prime spaces islandwide inched up 0.8% in
the first quarter from the previous period, led mainly by
higher rents for such spaces in Marina, City Hall and Bugis.
While overall retail rents could see a gradual 3-5% fall by
the end of this year with new supply coming onstream,
retail rents for prime spaces are likely to hold firm - and, in
fact, grow by 3 to 5% - by the end of this year, according
to a Knight Frank report.
Activity in China's factories increased marginally in April but
export orders fell sharply. The Purchasing Managers' Index
(PMI) rose to 50.4 in April from March's 50.3. The new
orders sub-index in the PMI rose to 51.2 in April from 50.6
in March, but the sub-index for export orders fell to 49.1
last month from 50.1 in March. Exports fell in annual terms
for a second straight month in March, the weakest run since
2009.
Treasury yields dipped ahead of the release of the closely
watched April employment numbers today. The 10-yr yield
eased 3bps to 2.61%. Consensus expects April non-farm
payrolls to improve to 218k from 192k the previous month
while the unemployment rate dips to 0.1% to 6.6%. At the
end of the FOMC meeting, the FED kept FED funds rate at
0.25% and said it will continue to trim the pace of bond
purchases as the economy gains momentum. The central
bank cut its monthly asset purchases to USD$45bil and said
further reductions in “measured steps” are likely.
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