DBS Equity Research: Wired Daily 15 June 2015

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Publish date: Mon, 15 Jun 2015, 06:24 PM

STI - Past inflexion point, expect choppy recovery underpinned by banks and SingTel

Stocks are likely to start the session lower amid concerns about Greece's ability to repay its debt and lingering uncertainties about the MERS outbreak in South Korea. Still, STI's rebound off the 3295 low last week is in-line with our view for an inflexion point at 3270-3300. Valuation touched 13.02x (-0.5SD) 12-mth forward PE, which is an attractive level even as one factors in the low single digit EPS growth of 1.6% to 3.2% this year. Expect index heavyweight banks and SingTel to underpin the STI. Our year-end objective for the STI is pegged at 13.76x (ave) FY16 PE, currently at 3650.

Market choppiness and some volatility cannot be ruled out even as the STI recovers off last week's low. The Singapore market has to climb a "wall of worries" towards its year-end objective over the next few months. Some of these are short-term term in nature. These uncertainties include shifts to US rate hike timing, concerns about Greece's ability to repay its debt and a potential pullback in the China A-share market.

U.S. stocks fell amid growing concerns Greece won't reach a debt deal with its creditors in time to avoid default. The latest round of talks over the weekend between Greek and EU officials has failed to reach a resolution. EU officials want Greece to make spending cuts worth €2bn in order to secure a deal that will unlock bailout funds. These include pension cuts, something that Athens said it will never accept. The FED policy makers meet this week to discuss the potential timing of an interest-rate increase

The drop in Apr14 arrivals and RevPAR is expected. Apr14 total visitors fell -3% y-o-y to 1.2m, lead by declines from Indonesia (-10%, Singapore's largest source market), Malaysia (-5%) and Australia (-8%). Going forward, we expect RevPAR to remain under pressure due to a combination of significant new room supply and tepid recovery in tourist arrivals. However, we expect some temporary respite during the SEA Games. We recommend investors to focus on hospitality REITs which have a geographically diversified portfolio or clear and visible growth drivers (organic or inorganic), given our cautious stance on the Singapore hospitality market.

We believe iFAST offers investors a unique investment proposition as a direct proxy to the wealth management industry as well as an angle into digital finance. We expect iFAST to grow at a faster rate than the wealth management industry which is expected to accelerate, given the growing demand for overall wealth management products in the region. We have imputed 20% growth in AUA for FY15-17F to result in 3-year earnings CAGR of 31%. Our AUA assumptions exclude M&As and its recent Bondsupermart initiative. A wildcard to iFAST's growth would be M&As. Maintain BUY, TP of S$1.73 (Prev S$1.60), after imputing a higher terminal growth rate of 4%, up from 2%, given its superior growth vs peers.

Mapletree Greater China Commercial Trust (MGCCT), announced the acquisition of a property located at Zhangjiang Hi-tech Park, Pudong New Area, Shanghai, China. The purchase consideration for the acquisition is RMB1,888.1m (or approximately S$412.2m) which comprises the property purchase price of RMB1,840.3m (or approximately S$401.8m) for Sandhill Plaza, a premium quality business park, and the estimated working capital adjustments attributable to the entities being acquired in connection with the acquisition. We are generally positive on the transaction as the acquistion further diversifies MGCCT's portfolio.

SIIC Environment Holdings has been awarded Meihu Water Treatment Center Phase 3 BOT wastewater treatment project in China. The Project entails the construction and operation of a wastewater treatment plant with a design capacity of 100,000 tons/day for a concessionary period of 27 years, including 2 years of construction phase.

CSE Global has sold its majority stake in a diesel engine maintenance unit for S$15.47m in cash, more than twice the amount it paid for it three years ago. CSE said the net sale proceeds would come up to about S$10.96m, which is roughly S$2.2m higher than Power Diesel's book value of S$8.76m.

Longcheer Holdings has entered into a non-binding memorandum of understanding (MOU) with Pacific Star Development to acquire the latter's 51% interest in Puteri Cove Residences & Quayside for S$120-150m in a cash-cumshares transaction. Puteri Cove Residences & Quayside is a mixed development fronting a marina comprising 658 freehold luxury apartments, serviced apartments, Soho/loft units as well as a retail promenade. It is scheduled to complete in the third quarter of 2017.

Lippo Malls Indonesia Retail Trust has been assigned a firsttime Issuer Rating of 'Baa3' with a 'Stable' rating outlook by Moody's Investors Service ("Moody's"). The rating reflects Moody's expectation of continued predictable cash generation from LMIR Trust's current portfolio, driven by steady occupancy levels.

Techcomp and Hitachi High-Tech Science Corporation have entered into a new distribution agreement. The new distribution agreement is for the marketing, after-sales service and distribution of the Scion gas chromatograph and mass spectroscopy (GC and GC-MS) products in Japanese market.

AsiaPhos has received the renewed exploration right for its Shi Sun Xi mine (Mine 2) from the Sichuan Land Department. The Mine 2 exploration right, which is for an exploration area of approximately 1.28 square kilometres, expired on 16 June 2014. The renewed right is valid from from 16 June 2014 to 16 June 2016. Currently, the Group holds another mining licence for, and operates 2.0237 square kilometres for Mine 2.

Source: DBS

STI ETF (ES3)Singtel (Z74)IFAST (AIY)Mapletree NAC Tr (RW0U)CSE Global (544)Lippo Malls Tr (D5IU)Yunnan Energy (T43)AsiaPhos (5WV)

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