Towards Financial Freedom
DBS Equity Research: Wired Daily 2 Nov 2015
STI - Rally stalls 3100, near-term 2950-3050 awaiting Dec policy decisions by ECB and FED
UOB - Results lifted by trading gains; maintain HOLD; S$19.20 TP
We believe that the rebound in the Singapore equity market has reached a high at 3100 last week. Over the course of the past month, our initial two upside levels of 3050 and 3100 for the STI was fulfilled but not 3150. With the yearend lull period approaching and the 100pt decline last week, the month long rally has stalled at 3100.
We see a 'quiet' November with STI range bound from 2950-3050 as investors await the outcome of the ECB policy meeting on 3 December and the FOMC meeting on 16 December. Investors are hopeful that the ECB may announce more 'QE' as early as December. Expectations for the FED to hike rates in December still hang on the balance.
The 3Q results season continues with large cap stocks SIA Engineering, Capitaland, SATS, SIAand ST Engineering reporting this week. Investors will also be eyeing the US October job numbers scheduled for release Friday. Consensus expects non-farm payrolls to come in at 165k while the unemployment rate 5.1%.
UOB's 3Q/9M15 earnings were in line; net interest margin (NIM) and loan growth was flat q-o-q; trading/investment income improved q-o-q while provisions remained high. A special dividend of 20 Scts per share was declared to commemorate UOB's 80th anniversary. Of its regional operations, general non-performing loan (NPL) trends have held up better than expected. Maintain HOLD; S$19.20 TP.
2Q16 results for Global Logistic Properties in line. We saw pick-up in operational momentum across its major markets of Japan, China and US. Maintain BUY, TP S$2.73 (Previous S$2.63) as we roll forward valuations.
3Q15 earnings for Sembcorp Industrieswere hit by disappointing Marine earnings. Excluding provisions, Utilities was better. Management remains hopeful to achieve its guidance of breakeven for its first Indian power plant this year. The Marine segment should also see earnings recovery in the absence of one-off items. We have cut our FY15/16F recurring profit after tax by 11%/8% to reflect Sembmarine's earnings revision and loss of income post divestment of SembSita from FY16 onwards. Maintain BUY, TP: S$4.20 (Prev S$4.00), after rolling over our valuation to FY16. We continue to like SCI for its regional expansion in its utilities business. Valuation is undemanding at below GFC trough.
Overseas Education expects to record a materially lower profit before income tax for Q3 2015, compared to the same period last year. This is mainly due to the higher depreciation charges associated with the completion of the newly completed school campus and the finance costs on bond borrowings from 1 July 2015.
Tiong Seng Holdings has been awarded a contract from the Land Transport Authority of approximately S$72.9m for the proposed construction of a bus depot at Sungei Seletar.
Singapore Exchange is eyeing a bigger slice of the booming ETF market pie. It has rolled out educational campaigns with brokers and waived clearing fees for a period. At the same time, it has allowed investors to trade more ETFs on the SGX platform without having to be qualified to do so. Globally, the amount of money parked in ETFs - almost US$3 trillion - overtook assets invested in hedge funds at the end of June, according to research firm ETFGI. Assets under management (AUM) for ETFs have increased dramatically from just US$74 billion in 2000. In Singapore, ETF-traded value in recent months has been just S$200m to S$300m a month.
Loans through the domestic banking unit (DBU) stood at S$608bn in September, down 0.8% from the month earlier. From a year ago, bank lending in September was up 0.6%, weaker than the 1.5% gain posted in August. The drag came from business loans, which fell 1.6% from August to S$367bn. From a year ago, business lending fell one per cent after three months of expansion. There was broad-based weakness, with lending to all industries - except construction and business services - falling in September from the month before. Consumer lending rose 0.2% to S$241 bn last month compared to August. Growth between July and August was flat. Over the year, the 3.1% growth in consumer lending reflects the overall deceleration in this segment; growth has fallen to single-digit levels since late 2013.
Source: DBS
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