DBS Equity Research: Wired Daily, 12 Sep 2014

kiasutrader

Publish date: Fri, 12 Sep 2014, 12:04 PM

Singapore's economic growth likely a sub-par 3% this year before improving to 3.6% next

Our Singapore economist believes that GDP growth will stay below potential this year at 3% growth before improving marginally to 3.6% next year. The external outlook remains tepid while domestic restructuring is still a drag. Meanwhile, inflation has undershot expectation (1.5% 2014F) but set to rise next year (2.8% 2015F). He expects the MAS to maintain its exiting Sing NEER appreciation stance.

SingTel has appointed Mr. Jonathan Auerbach as Digital Life! CEO. Mr Auerbach comes from Mckinsey & Company where he led technology practices in both Asia and North America. We have a Buy call on the stock with SOP based TP of S$4.2 premised on (i) SingTel's regional associates may spearhead double-digit growth after 4-years hiatus on the back of rising pricing in India and Indonesia (ii) SingTel's digital business may have bottomed out last year ending two years of initial pain as implied by its guidance of 20% decline in EBITDA losses for the segment.

Del Monte Pacificreported 1Q net loss for the 3 months ended July of US$21.9mil, compared with a net profit of US$4.15mil

for the year-ago period. This was due mainly to higher expenses, including expenses linked to the acquisition of Del Monte Foods, Inc (DFMI). Turnover came in at US$446mil, which included DMFI's sales of US$340mil. This compared with sales of US$119mil last year.

Viva Industrial Trustsaid that its trustee would acquire 2 industrial properties for S$112.8mil. The first is Jackson Square, which comprises 4 blocks of light industrial buildings at 11 Lorong 3 Toa Payoh with a gross floor area (GFA) of approximately 418,586 sq ft, for S$80mil. The other is Jackson Design Hub, a five-storey modern light industrial building at 29 Tai Seng Street with a GFA of about 85,070 sq ft, for S$31.5mil. Following completion of the acquisitions, the real estate investment trust will increase its investment property base by 16% to S$841mil.

Around the region, its reported the Malaysian Communications and Multimedia Commission (MCMC) plans to review and possibly refarm 2G spectrum on the 900MHz and 1800MHz frequency bands. The regulator's aim is reportedly to rebalance the spectrum allocation and narrow the gap between big and small players. 2G spectrum on 900MHz and 1800MHz are currently held by the Big 3 incumbents, i.e. Maxis, Celcom and DiGi. As such, they stand to lose if there is a refarming, regardless of the outcome. Our Malaysian telco analyst says DiGiwould be the least affected as it owns very little spectrum in the coveted 900MHz band. For Maxis, we see further risks to dividend payouts given that gearing is approaching its limit of 2.0x net debt/EBITDA.

US stocks ended off session lows as a rebound in oil offset concerns over escalating geopolitical tension and the timing of possible interest-rate rise. Stocks have been holding ground this week ahead of the September 17 FOMC meeting that could shed light on the timing for interest rate hike. In Europe, EU officials said new sanctions against Russia will come into force because of the country's continued support of separatists in Ukraine. EU countries agreed to implement plans to bar some Russian stateowned defense and energy companies from raising capital in the bloc. The U.S. joins the EU in slapping more sanctions on Russia. Energy companies recovered as WTI crude rebounded from an 8-month low and Brent oil erased losses.

Source: DBS

Singtel (Z74)Del Monte Pac (D03)

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