DBS Equity Research: Wired Daily 16 Feb 2015

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Publish date: Mon, 16 Feb 2015, 01:43 PM

Brent rally pans out as expected - A temporary pullback towards US$55pbl is possible before heading higher again towards US$72

NOL- Looking to better quarters ahead; maintain BUY and S$1.10 TP

The direction of earnings revision has bent positively thus far in this earnings season. For example, our current year-end is now higher by some 53pts to 3665 based on 13.4x (-0.25SD) FY16F PE.

We said last week that whether the STI is able to clear the 3450 level soon will depend on earnings revisions of index heavyweights. Assuming the positive earnings revisions continue to sustain or better yet, improve through the remainder of the current results season, we now see the STI heading towards 3530 by end of 1Q.

We expect trading activity to be light in this holiday shortened week as investors usher in the Year of the Sheep.

Our recent positive view on oil continues to pan out. We gave an update last week that oil price can rebound higher with

Brent reaching US$62.7pbl, followed by s pullback back towards US$55pbl, before subsequently heading yet higher again to US$72pbl. Brent crude rallied last week and nearly reached US$62.7pbl thus far this morning. We maintain our view on oil price. From here, a pullback towards US$55pbl in coming week or two is possible, before heading higher again towards US$72pbl.

NOL recorded higher-than-expected net loss of US$85m in 4Q14, as freight rates continued to be volatile. However we noted a decline in operating expenses per FEU (40-foot equivalent unit) in 4Q14. Further cost improvements expected in FY15 on the back of lower oil prices and fleet optimisation. Possible sale of logistics division could help bolster balance sheet; lead to one-off disposal gains. Maintain BUY and S$1.10 TP.

Frasers Centrepoint Ltd (FCL) registered a strong start to 1Q15, underpinned by contribution from Australand. Looking ahead, locked-in unrecognized revenues of S$3.9bn are expected to underpin growth while capital recycling is a spark to re-rate stock. FCL has existing capital recycling platforms in its listed REITs - Frasers Centrepoint Trust, Frasers Commercial Trust and Frasers Hospitality Trusts which are trading well and can potentially acquire stabilised assets from FCL, freeing up capital to invest in

other higher ROE development projects. FCL is trading at cheap valuations. Maintain BUY, target price S$ 2.02 (Prev S$ 2.05).

UOB's4Q14 earnings were dragged by lower trading income as expected. Topline growth was led by loan growth (+9.5% y-o-y) as NIM slipped 2bps q-o-q due to funding cost pressures as deposits grew aggressively at 9% y-o-y. UOB declared a 50 Scts final DPS and a 5 Scts special DPS, bringing its full-year DPS to 75 Scts. Dividend payout has dipped and may likely stay in that trend. UOB is guiding for a flat NIM going into FY15 despite the higher interest rate scenario. Maintain HOLD and S$23.10 target price.

Wilmar's 4Q14 core earnings of US$412m were well ahead of our/consensus expectations. Sequential jump in Palm & Lauric M&P pretax was partly offset by a 61% drop in Oilseeds & Grains and 66% in Sugar pretax profits. We expect steady M&P earnings, offset by seasonal loss in Sugar milling contribution in 1Q15. Earnings were revised by +3.4% to +4.2%; target price adjusted to S$3.50 (Prev S$ 3.45). HOLD rating unchanged.

3Q15 DPU of Religare Health Trust within expectations, forms 71% of our forecasts. 1H16 distributions are hedged at SGD/INR 50.23. We raised FY15F/16F DPU by 6%/15% on the back of the revised SGD/INR assumptions. Maintain HOLD, TP raised to S$1.06 (Prev S$ 0.82) due to revision in INR forex rates. At current price, RHT offers a yield of 6.9%/8% for FY15F/16F.

Metechproposed placement of up to 468.7m new shares at an issue price of S$0.004 per share. The Placement Price is without discount from the last weighted average price. The estimated net proceeds of approximately S$1.8m will be used by the Group to expand into new related businesses and for general working capital purposes. The Group is also exploring and considering the proposed transfer of SGX listing from main board to Catalist.

Tiong Seng is expected to report a net loss for 4Q and FY 2014, mainly due to impairment loss for the Group's property development projects in the PRC.

Business sentiment in Singapore soured rapidly in Q4 2014, as sales, profits and orders took a turn for the worse. Pessimism among companies spiked to its highest since Q3 2012, said the latest Business Times-UniSIM Business Climate Survey, which paints a gloomier picture than official surveys and predicts that GDP could slow further or even stagnate in Q1 this year.

Singapore's retail sales rose by a smaller-than-expected 2.6% in December compared to a year ago, below consensus forecast of a 4.5% rise. Excluding the sales of motor vehicles, retail sales saw a 3.2% decrease. Lacklustre retail sales were due in part to a dip in sales of wearing apparel & footwear and recreational goods by 7.9% and 7.8% respectively, which contributed to the fall in total sales excluding motor vehicles. Compared to November, the seasonally adjusted retail sales figure declined by 2%. Excluding motor vehicles, retail sales decreased 3.3%.

Source: DBS

Frasers Property (TQ5)UOB (U11)Wilmar Intl (F34)RHT HealthTrust (RF1U)

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