Towards Financial Freedom
DBS Equity Research: Wired Daily 4 May 2015
Singapore Banks - MAS announces seven banks that qualify as D-SIB. No impact on Singapore banks
CapitaLand - Rising core profits. BUY maintained, TP raised to S$4.11
SMRT - Earnings recovery in progress. Maintain BUY, TP revised to S$1.88
US markets ended Thursday lower but recovered on Friday. Returning from the long weekend here, the Dow is net flat in the past 2 sessions. We maintain our view that in the near term, STI should range within support at 3430-50 that coincides with the 13.4x (-0.25SD) 12-mth forward PE and resistance at 3520-3550 that is around the 13.8x (ave) 12-mth forward PE. A pullback to support presents an opportunity as the underlying trend remains up. Fibonacci projection suggests that STI's current pullback should end at either 3460 or 3420.
Our current year-end target is 3620 based on a conservative 13.4x (-0.25SD) FY16F PE. If the current tendency for the Singapore market to head for its 13.8x (ave) 12-mth forward PE continues, there is room for the STI to end the year at
3720.
MAS announced that seven banks qualify as D-SIB (Domestically Systemic Important Banks). MAS' D-SIB framework is aligned with principles set out by the Basel Committee for determining banks that are of domestic systemic importance. The seven banks are DBS, OCBC, UOB, Citibank, Maybank, Stanchart and HSBC. The locally incorporated D-SIBs will need to meet higher capital requirements -minimum CET1 CAR of 6.5%, Tier-1 CAR of 8% and Total CAR of 10% compared to Basel III minimum requirements of 4.55%, 6% and 8% respectively. MAS will allow a transition period for affected banks to comply with the requirements that are currently not in effect, such as the local incorporation requirement.
The announcement has no impact on Singapore banks. Based on the latest 1Q15 results, all Singapore banks are well capitalised. Maybank from Malaysia would likely have to locally incorporate its operations in Singapore. As at December 2014, Maybank's total assets in Singapore was S$57bn with 1,800 employees. As at the same date, Maybank's S$ deposits stood at S$39.6bn, equivalent to 7.2% market share. This compared to 19.9%, 19.4% and 13.9% for DBS, UOB and OCBC respectively as at Dec-14.
CapitaLand's1Q15 results in line. Main business units deliver steady increases in performance. Residential sales continue to improve while Malls continue to ramp up. We continue to expect steady improvement in earnings going forward with catalysts coming from (i) deployment of cash to new investments, (ii) better sales for its projects in China and (ii) asset recycling to its REITs. BUY maintained, TP raised to S$4.11 (Prev S$ 3.88). Our revised TP is based on a reduced 15% discount (25% previously) to RNAV of S$5.14.
SMRT's 4Q15 earnings were a tad lower than expected due to higher repair and maintenance costs; FY15 registered net profit growth 47% y-o-y to S$91m. Non-fare revenue remains the main profit contributor; bus segment post lower losses. We expect recovery to continue on lower energy costs and higher fares. We trimmed our FY16F/17F earnings marginally by 4%/2% as we factored in higher repair and maintenance costs assumptions. Maintain BUY, TP revised to S$1.88 (Prev S$ 1.90).
OCBC's1Q15 earnings above consensus/in line with our estimates. NIM slipped and loan growth was uninspiring; upside to NIM possible in coming quarters but FY15F loan growth guidance toned down to mid-single digit. Asset quality remained solid; capital dipped on higher riskweighted assets. Maintain BUY, S$12.70 TP.
1Q15 earnings for UOB were in line with our/consensus estimates. NIM surged, contrary to peers in absence of surplus liquidity; provisions remained high. Guidance going forward remains conservative. Unlike peers, UOB is guiding for a flat NIM going into FY15 despite the higher interest rate scenario as it believes funding costs would likely dent positives it might gain from the rate hike. Loan growth is guided at 5-10% for FY15. Maintain HOLD, S$23.10 TP unchanged.
1Q15 results for Yangzijiang Shipbuildingin line; shipbuilding gross margin remains healthy at 20.8%. New orders worth US$238m were secured. Yangzijiang has been invited to participate in China RongSheng's restructuring exercise. Management does not rule the possibility of dual-listing in HK/China if fund-raising is required to finance major M&A. Yangzijiang is a prime beneficiary of industry consolidation. Maintain BUY; TP S$1.62.
Excluding a one-off gain in 1Q14, 1Q15 earnings for China Merchants Hldgs (Pacific) rose 8% y-o-y to HK$142m. Revenue grew 6% y-o-y to HK$494m, driven by Yongtaiwen E'way and newly acquired Jiurui E'way. We expect further upside from potential acquisitions. Maintain BUY and exdividend TP of S$1.42
1Q15 results for Cosco Corporation below. Our analyst cuts FY15/16F earnings by 17%/12%. Lingering concerns over drillship and cylindrical rig sagas; more eferment/cancellations are likely. The recent share price rally is unjustifiable. Share price has surged 25% in the past 3 weeks, buoyed by the rally in the China stock market and speculation of restructuring on Chinese SOEs. Maintain FULLY VALUED; TP S$0.49.
Indofood Agri Resources reported 1Q15 earnings of Rp35bn, below expectations on lower ASP, lower yields and FX losses. FFB yields were adversely affected by dry weather in both 1Q15 and 1Q14. HOLD call and TP of S$0.77 maintained for now.
Japfareported 1Q15 net income of US$7.0m (-48% y-o-y). Stripping out the changes in fair value of biological assets attributable to shareholders; 1Q15 core net profit came in at US$1.6m (-77% y-o-y) - representing just 2% of our FY estimates (vs. 20-30% historical). The earnings drop principally reflects subsidiary Japfa Comfeed's 1Q15 net loss of Rp221.7bn, which translated to US$10.3m loss contribution (57.5%-owned) to Japfa Ltd. Consumer Food segment also contributed net loss of US$1.1m. Recommendation and TP under review; more updates post briefing today.
iFASThas obtained approval from the Monetary Authority of Singapore (MAS) to extend its conduct of dealing in and providing custodial services for securities to include bonds and exchange-traded funds (ETFs), subject to additional licence conditions proposed by MAS. The approval will allow iFAST Financial to broaden the range of investment products that it can distribute. iFAST Financial is planning to commence the distribution of bonds and ETFs in Singapore during the second quarter of 2015.
Ramba Energy has entered into a private share placement agreement, which is expected to raise approximately S$17.9m in net proceeds. The Group has agreed to place a total of 68m shares priced at S$0.27 cents per share to Indonesian tycoon and philanthropist Dato Sri Prof. Dr. Tahir MBA. Upon completion of the share placement, Dato Sri Tahir will hold 14.9% interest of the enlarged issued and paid-up share capital of the Group. Ramba plans to utilise 60.9% of the proceeds raised for activities related to the Group's oil and gas work programme. OKP Holdings secures PUB contract worth S$146.5m for Upgrading the Bukit Timah First Diversion Canal (between Holland Green to Clementi Road). The project will commence on 5 May 2015 and span over 36 months.
Source: DBS
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
