DBS Equity Research: Wired Daily 12 Mar 2015

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DBS Equity Research: Wired Daily 12 Mar 2015

kiasutrader

Publish date: Thu, 12 Mar 2015, 12:12 PM

Singapore market trading closer to valuation trough, no change in view for resilience

Technical view - FCT downside bias to $1.915-1.93, resistance $1.99

Jardine Cycle & Carriage - Sedate earnings outlook; downgrade to HOLD, TP cut to S$ 44.95

While the STI dipped marginally below our stated 3380 near term support, we maintain our view that the Singapore market should be resilient amid the current US rate hike uncertainty and the weak SGD against USD. At 3378, STI trades below the 13.4x (-0.25SD) 12-mth fwd PE level of 3425. The 13x (-0.5SD) 12mth forward PE level is at 3330, which is less than 50pts below current level. From a forward PE perspective, we believe that the Singapore market is close to its valuation trough as the current weakness is due more to funds outflow from the weak SGD rather than contagion, crisis or recession concerns.

But sentiment for SREITs remains fragile amid increased prospect of a FED rate hike later this year. For example, we note shares of Frasers Centrepoint Trustfell below the $1.99 level yesterday on a slightly higher-than-average daily volume that signal a negative 'double top' reversal. This places nearterm resistance at $1.99 with downside bias to $1.915-1.93.

We downgrade Jardine Cycle & Carriage to HOLD, target price cut to S$ 44.95 (Prev S$ 49.88). JC&C's FY14 results showed an 11% y-o-y decline in underlying profit to US$793m, hit by weak rupiah and Astra performance. (JC&C owns ~50.1% stake in Astra). We have lowered our FY15/16 earnings forecasts for Astra by 15%/17%. Meanwhile, as the US$ is expected to strengthen against the Rupiah to 13660 by end-2015 and 13870 by 1Q16, we have cut our FY15/16 US$ earnings forecasts for JC&C by 27%/35%. We now project JC&C's earnings (in US$ terms) to decline 7% y-o-y to US$759m and grow a modest 2% y-o-y to US$775m in FY16. Dividend payout is likely to remain tepid; with total dividends cut to US 85cts for FY14 from US 108cts the year before on weaker earnings.

Global Logistic Properties has signed new agreements totalling 63,000 sqm (678,000 sq ft) with four customers in China. The customers include leaders in e-commerce, packaged foods and pharmaceutical industries, and three are multi-location GLP customers in China.

Yoma Strategic Holdings has received approval from the Myanmar Investment Commission (MIC) for the extension of the Landmark lease, for the redevelopment of the former headquarters of the Burma Railways Company into a fivestar hotel. This decision has been reached by the MIC after a protracted period of negotiations.

The chairman of Noble Group, Richard Elman, has boosted his stake in the firm, after the shares dropped to more than a one-year low. Noble shares have been under pressure since mid-February after a little known firm Iceberg Research raised questions about the company's accounting practises, claims denied by Noble. Mr Elman increased his stake to 20.956% from 20.926%, the filing showed.

CNA Group has signed a non-binding memorandum of understanding (MOU) with LiuLinxian Senzetengfei Aluminium Industry (LSAI) for a 5% shareholding (value to be determined after due diligence) to participate in the business of bauxite processing plant and mine in Shanxi, China.

Catalist-listed Junma Tyre Cord Company is proposing a voluntary delisting, with Ultimative making an exit offer price of 20 Singapore cents, in cash.

The Singapore dollar bond market is perking up, with funds raised so far this month more than three times the amount in the same period last year, as issuers dangle higher yields. There have been eight issues, with over S$1.1bn raised. In the same period last year, there were five deals worth S$335m. Year to date, the SGD bond market is still some ways behind. From Jan 1 to March 9, there have been 29 deals worth S$2.83 bn, which is 63% of the S$4.49 bn raised in the same period last year, also from 29 transactions. In contrast, the equity market has been in a drought as volatile market conditions have resulted in zero initial public offerings in Singapore up to March 9.

The second package of public bus services under the Government Contracting Model will be put out for tender in the second quarter of this year. Under this package, the bus services will be operated from the new Loyang bus depot to serve primarily the Punggol and Pasir Ris areas. They will be deployed out of Changi Airport Bus Terminal, Changi Village Bus Terminal, Pasir Ris Bus Interchange, and Punggol Bus Interchange. Consisting of about 400 buses when implemented in the second half of 2016, it will grow to about 500 buses in 2021 in tandem with new developments and projected growth in ridership.

US stocks fell modestly as a slump in consumer and technology shares offset gains among banks. The Euro declined as the ECB starts its bond buying program. Last week's stronger-than-forecast U.S. jobs data is fueling speculation that the Federal Reserve may signal earlier rate increases when policy makers meet next week. Contrary to this, most central banks are adopting an easing path with Thailand unexpectedly cutting rates yesterday.

Source: DBS

Jardine C&C (C07)Yoma Strategic (Z59)

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