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DBS Equity Research: Wired Daily 22 July 2015

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Publish date: Thu, 23 Jul 2015, 10:24 AM
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ASEAN Grocery Retail - Prefer stocks with good growth potential and attractive valuations: Dairy Farm and Sheng Siong Group

Growing wealth, urbanisation, affluence and a rising middle class in ASEAN has fuelled changing consumer spending habits from needs to wants, better consumption and shopping experiences. We see ASEAN modern grocery retail continuing to develop at a FY14-17F earnings CAGR of 4-28%, driven by store openings and margin expansions. Prefer stocks with good growth potential and attractive valuations. We like the ASEAN Grocery Retail for its attractive ROE, defensive qualities, strong cash generating ability and headroom for earnings growth. For SGX-listed stocks, we like Dairy Farm for its attractive valuations, and Sheng Siong Group for its growth traction and yield.

The Stratech Group has secured a key contract for its flagship iFerretTM intelligent Vision system, which will pave the way for it to advance further into the US commercial airfield surveillance market. The contract was jointly won with Stratech's US partner, Organizational Strategies, Inc. (OSI). OSI is a US Federally qualified small business that has been working in aviation, aviation engineering and with the FAA for over a decade. The Group expects the latest contract to contribute positively to its earnings for the current financial year ending 31 March 2016.

Lion Asiapac is expected to report a loss for the fourth quarter and full year, due to allowances made to impairment in the fair values of investments, manufacturing plant and equipment, and property development.

The Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) are reviewing the 2015 growth forecast for the economy, taking into account the weaker output in the first half of the year as well as supporting factors in the second half. MAS is closely monitoring three key risks in the external environment. The first is Greece, where the situation remains highly uncertain. The second is China, where downside risk has increased, and the third, the region, where financial conditions could tighten sharply as the US Federal Reserve hikes interest rates.

MAS also announced that the Singapore Savings Bonds will be issued on Oct 1, 2015. A new Savings Bond will be issued every month for at least the next five years. Individuals can start investing with as little as S$500. The overall cap on the individual investor is S$100,000; the cap on any single issue is S$50,000.

US stocks declined on weak results. Sales for IBM fell for a 13th quarter while United Technologies lost 7% after cutting its 2015 profit forecast. Microsoft Corp fell following its largest-ever quarterly net loss. Apple's share price was also weak after iPhone shipments missed forecasts.
 
Source: DBSiains buoyant
Lion Asiapac (BAZ)
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