Most Preferred: Add United Overseas Bank, SATS
UOB has been our preferred bank in Singapore for its defensiveness. UOB's ability to tap cheap US$ deposits and access to US$ loan demand led to flat funding costs and better loan growth than some peers. In addition, UOB's highest capital, highest provisions and least exposure to China / commodities make it stand out against peers. Q4 underlying PATMI of S$51.6m was up strongly at +21.1% YoY, while FY15 PATMI of S$195.9m (+7.0% YoY) was ~6% above UBSe.
We believe the theme of lower operating costs will continue to materialize for SATS in FY16. Apart from indirect benefits from traffic growth boosted by a set of reductions in fee from Changi Airport, SATS will be a direct beneficiary from a 20% rebate on franchise fees and cost saving from declining electricity and fuel prices in Singapore. SATS is a most preferred.
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