DBS Equity Research: Wired Daily 22 Oct 2015

kiasutrader

Publish date: Thu, 22 Oct 2015, 02:58 PM

Banks - Mixed quarter expected. Concerns on asset quality on the cards; NIM uptick may be limited

Mapletree Industrial Trust - Development projects to drive upside from FY18F onwards. Upgrade to BUY with revised TP of S$1.62

STI continues to behave within our expectation for a much muted behavior following the recent strong rebound in the first 2 weeks of October. Price performance of blue chips stocks have been muted this past week. We had pegged a near-term range of 2950-3050 with modest any modest overshoot capped at 3100 - no overshoot so far as investors await the results season to unfold. Within this range, be watchful of the intermediate level @ 3010, weakness below this signal a dip to 2975 or 2950.

We expect a mixed quarter for Banks. Concerns on asset quality for Banks will be on the cards this quarter. With SIBOR higher by almost 30bps q-o-q, one would expect a bumper quarter for NIM (net interest margin). However, regional funding cost pressures and excess liquidity conditions may wipe out most of the NIM uplift. And as a result, NIM uptick for 3Q15 is likely to be muted. Loan growth is expected to be soft q-o-q, judging by statistics observed up to Aug-15. OCBC is our pick in the sector. We continue to prefer OCBC over UOB for its relatively healthier asset quality, potential traction from its Greater China expansion and its wealth management platform.

2Q16 results for Mapletree Industrial Trust remain steady. Occupancy rates remain steady at 93.6%, while average monthly portfolio rentals continue to inch up to S$1.88psf albeit at a slower rate. DPU of 2.79 Scts (+2.2% y-o-y) is slightly ahead of expectations as the manager continues to keep costs tight. We tweak our numbers up by 2% to account for better-than-expected margins. Development projects are expected to drive upside from FY18F onwards. We see MINT's resilience as a value trait in this market and believe yields of 7.3%-7.8% as attractive for a solid name. Upgrade to BUY with revised TP of S$1.62 (Prev S$1.50), offering total return of 15%.

The Stratech Group has secured another contract to upgrade its iFerretTM intelligent Airfield/Runway Surveillance and Foreign Object & Debris (FOD) Detection System at Singapore Changi Airport. This follows an earlier contract in April this year for the first phase of the iFerret™ upgrade previously announced. The contracts for both the first and this second phases of the iFerret™ upgrade include options for the installation of iFerret™ at the airport's upcoming third runway, maintenance and other works.

First Reit has inked a deal to sell an empty plot of land in Surabaya for S$8.2m and later on an existing hospital building next to the plot for at least S$27.5m to its sponsor Lippo Karawaci. In total, First Reit will get at least S$35.7m from selling the land parcel and the existing hospital building. This sum was more than double the combined S$16.8m it had paid to acquire the two properties in December 2006 as part of its initial portfolio.

US stocks fell amid a mixed corporate earnings day. Commodity stocks led declines as oil and gold prices fell. Brent crude fell 1.8% to USD47.85pbl after an Energy Information Administration report on Wednesday indicated U.S. crude inventories grew last week.

Source: DBS

Mapletree Ind Tr (ME8U)OCBC Bank (O39)UOB (U11)First Reit (AW9U)

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