Towards Financial Freedom
DBS Equity Research: Wired Daily 29 Jan 2015
Singapore Banks - Moderate growth outlook; manageable challenges. Prefer OCBC.
We expect moderate growth outlook for Singapore Banks. There are challenges ahead but manageable. While we had anticipated SIBOR to move in tandem with the expected Fed rate hike by end of the year, SIBOR had moved ahead. We believe the impact of the rate hike has been partially priced in but the potential challenges that come with it, especially higher funding cost and a normalisation of the credit cycle, may have been ignored. Banks appear to be well braced up. For 2015, we expect loan growth to average at a high single digit, net interest margin (NIM) improvement by 4bps, and 10% growth in non-interest income. These will be offset by higher expenses (digitisation and integration costs) and normalised credit costs. We forecast a 10% core earnings growth for 2015. All eyes will be on OCBC-WHB's progressive integration while UOB's next move will likewise be under market scrutiny. Our preference remains with OCBC.
CDL Hospitality Trusts'4Q14 DPU of 3.13 Scts (+7% y-o-y) in line. Growth in DPU was largely attributed to increased contribution from Maldives operations. We expect earnings recovery in FY15 but potential softness in corporate demand ahead of Chinese New Year. Maintain BUY, TP S$1.86. We continue to like CDREIT for its exposure to a recovery in the Singapore hospitality market.
4Q14 DPU of 1.78 Scts for OUE Hospitality Trust in line. We expect recovery in FY15 but some near term volatility post the recent AirAsia incident. Diversification benefits and DPU accretion from Crown Plaza Changi Airport acquisition. Maintain BUY, target price raised to S$1.02 (Prev S$ 0.95).
YTL Starhill Global REIT's4Q14 DPU of 1.29Scts in line. Strong Singapore performance offsets weaker overseas contribution. We have adjusted our TP downwards slightly to S$0.88 to account for weaker MYR/SGD and lower income contribution from China. At its current price, Starhill Global REIT offers investors an FY15 dividend yield of 6.2% and a total return of 11%. Maintain BUY, TP S$0.88 (Prev S$ 0.90).
Ntegrator has secured four contracts worth S$10.7m for projects in Vietnam, Singapore and Myanmar. The new orders from Viettel are for the supply of a batch of high performance batteries and provisionof SDH equipment for network expansion. Ntegrator was also awarded a contract by the Directorate of Procurement in Myanmar for the supply of Telecom transmission equipment and accessories, and a contract for the supply, installation, testing and commissioning of the Communication Backbone Network by Singapore Technologies Electronics.
Singapore consumer confidence is at its highest level since July last year, with the ANZ-Roy Morgan Singapore Consumer Confidence rising one per cent to 122.8 points in January. This is above the 2014 average of 121.1 points. More consumers in Singapore are optimistic about their families' finances, but fewer are confident about the outlook for the economy.
Although inflation may look benign right now - especially with the Monetary Authority of Singapore (MAS) slashing its inflation forecasts for 2015 - the consumer price index (CPI) is expected to rise in the second half of this year. MAS said that going forward, core and headline inflation are expected to ease further, before rising in H2 with some recovery in global oil prices and in view of the base effects associated with the low inflation in Q4 2014.
US markets fell for a second day as concerns grew about international risks to the American economy and weakness in multinational earnings. Energy stocks led declines after oil price fell following data that showed U.S. crude stockpiles expanded to the most in more than 3 decades. Crude supplies in the US rose by 8.87mil barrels to 406.7mil last week, this according to the Energy Information Administration. The Fed boosted its assessment of the economy and downplayed low inflation readings while repeating a pledge to remain "patient" on raising interest rates. The Fed acknowledge global risks, saying that it will take into account readings on "international developments" as it decides how long to keep rates low. Meanwhile, Greece's new Prime Minister Alexis Tsipras named a cabinet yesterday that includes a foreign minister who raised questions over European Union sanctions against Russia and a finance minister who has called Greece's bailout a trap, while new ministers said they will cease the sale of some state assets and increase the minimum wage.
Source: DBS
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