Towards Financial Freedom
DBS Equity Research: Wired Daily 14 August 2015
Singapore banks' sell-down overdone; fundamentals largely intact.
Our analyst believes that the Singapore banks' recent selldown on RMB devaluation stance is overdone, and their fundamentals are largely intact. The Sing banks collectively fell 5% yesterday with market citing concerns on their exposure to China. Note that Sing banks collectively derive 22% of pre-tax profit from Greater China. We believe slower loan growth expectations have been priced in. Expectations of higher NIM would depend on rate hikes but even that should also be priced in, in our view. We believe the market could be overplaying the potential of an asset quality blow-up. There is no capital raising risk for the Singapore banks.
City Developmentreported a strong set of 2Q15 results. A special dividend of 4Scts per share has been declared (same as last year). Residential sales remain slow, given weaker new launch momentum. South Beach development will be a driver for revenues from 2H15 onwards. UK remains a key market for opportunities. Its residential projects in China remain launch-ready in 2H15 onwards. We maintain our BUY call and TP of S$11.54.
2Q15 net profit for ComfortDelgro (CD) within expectations; 4 Scts DPS declared. Benefits of lower oil price were negated by other costs. CD has hedged 65% of its fuel requirements in Singapore for FY15 and 26% for FY16F. This could provide marginal upside to earnings and margins for FY15F. Maintain HOLD, TP at S$3.00.
First Resourcesreported 2Q15 earnings of US$28.6m, below our and consensus expectations on annualised basis. Earnings were dragged by falls in Refining & Processing EBITDA and CPO ASP. FY15F/16F earnings revised by -8%/-3% to adjust for lower forecast downstream volume and lower CPO ASP. Upgrade to BUY with revised TP of S$2.04 (based on DCF) (Prev S$2.11). We recommend investors to accumulate FR on any near-term weakness, as we believe its current share price has more than reflected lower earnings prospects over the next 12 months.
Bumitama Agri's 2Q15 earnings of Rp217bn were below expectations on annualised basis. The underperformance was caused by 14% y-o-y drop in CPO ASP, associate losses, and 16% y-o-y lower FFB yield. FY15F/16F earnings cut by 14%/12% on lower CPO ASP assumptions and slightly lower FFB yields. Maintain BUY for 36% upside to revised TP of S$1.17 (Prev S$1.26). We expect a strong 3Q15 output to compensate weak CPO ASP.
2Q15 operating profit for Thai Beverageslightly behind; bottomline helped by JV/ associates contribution and asset sale gains. Interim DPS of THB1.5/share declared, similar to last year. Spirits' performance was impacted by destocking by agents post introduction of National Sports Development Fund tax. We expect near term hiccups, but long term still resilient. Maintain BUY, TP: S$0.81.
Pacific Radiance's OSV fleet utilisation recovered to around 77% in 2Q15 from 50% levels in 1Q15, but it will be difficult to sustain these levels amid the current oil price environment. Day rates have declined by up to 30% for its OSV fleet and further downside can be expected when existing contracts are repriced. With no immediate recovery in OSV demand expected, we cut FY15/16 earnings by 16%/20% respectively. Core earnings are expected to decline 72% in FY15 and ROEs are expected to remain much below normalised levels. Maintain HOLD, target price S$0.42 (Prev S$0.67). Valuations look cheap but share price performance could be capped by lacklustre earnings performance in subsequent quarters and oil price volatility.
Nordic Group has been awarded a contract of approximately S$4.2m to provide labour and materials to perform piping and insulation works for Chevron Carboxylate Project. The contracted works will mainly be carried out in 2016.
In property news, resale prices of private condominiums and apartments inched up 0.3% in July 2015 compared to June. The increase was mainly due to higher prices in the city and suburban areas which saw prices rise 1.7% and 1% respectively. Prices in the city fringe fell by 2.2%, however.
Source: DBS
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