Towards Financial Freedom
DBS Equity Research: Wired Daily 11 Dec 2015
Singapore Banks - Rate hikes may not translate to a significant NIM spike. OCBC remains our preferred pick Expectations are rife for the first Fed rate hike in years - 25bps by mid-Dec and another 25bps in 1Q16. However rate hikes may not translate to a significant net interest margin (NIM) spike as: (1) we expect funding costs to catch up, dampening the impact of loan yield increases on NIM; (2) in addition, with the S$ loan-to-deposit ratio now at a high of 87% from 79% two years ago, there may be little room left for banks to leverage on; and (3) the wildcard on whether Singapore banks still carry surplus US$ liquidity may dampen overall asset yields and hence NIM. We expect earnings momentum to moderate in 2016 from lack of drivers; positive surprise could arise from lower-thanexpected credit costs. Asset quality largely stable; but expect higher credit costs as we reach the end of a benign credit cycle. OCBC remains our preferred pick.
Malaysia's Nov-15 palm oil output came in slightly below expectations at 1.653m MT However, exports slumped 12% m-o-m to 1.499m MT, pushing stockpile to a new record of 2.908m MT. We expect year-end inventory to settle at 2.529m MT, as Dec-15 output drops by another 7% m-o-m. Top pick: Wilmar. We believe a stable price environment and ramp-up in Indonesia's B15/B20 mandate should continue to benefit Wilmar.
City Developmentsannounced its re-entry into the Australian residential sector after more than a decade since
its last project there in 2003. It is partnering Australian developers, Abacus Property Group and KPG Capital, to develop a prime residential land site in Brisbane's South Bank precinct. Located at Merivale Street in the heart of South Brisbane, the project is at a 2,733 square metre (sqm) freehold site and will be built into two 30-storey towers, with a total of 472 apartments with a gross development value of A$275m (S$281m).
UMS Holdings has signed a Memorandum of Understanding (MOU) with an aerospace metallic component manufacturing company, All Star Fortress Sdn. Bhd. (ASF). Under the terms of the MOU, UMS will invest RM0.1m into ASF via new shares subscription for 10% equity of ASF's enlarged shareholdings. UMS will also extend to ASF secured convertible loans up to a total of USD7.5m, which includes USD6.7m for ASF to strengthen its capability and expand its manufacturing capacity to meet the long term needs of aerospace customers. ASF will relocate its manufacturing operations to UMS' Penang premises, allowing the Group to better utilized its facility space.
TMC Education has finally found a potential buyer for two strata-titled lots at Peninsula Plaza but will have to book a S$1.21m loss on the sale. The two lots effectively consist of 10 strata units with 2,971 square feet of total area. The group plans to use the net proceeds of S$4.41m for working capital and to repay its borrowings.
Source: DBS
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