Towards Financial Freedom
DBS Equity Research: Wired Daily 8 Mar 2016
STI - Maintain view for pullback to 2770 before heading for 2900, gains likely lesser broad based going forward
OSIM - Investors should hold out for a premium above the S$1.32/share offer price if possible, downgrade to HOLD TP $1.28
The benchmark STI reached a high of 2850 yesterday before pulling back slightly to end at 2823. In line with our expectations (refer to yesterday's Wired Weekly), bank stocks eased while the O&M stocks gained further ground. We maintain our view that in light of the sharp gains over the past 2 weeks, the STI should see a moderate pullback to 2770 before heading higher again to 2900. We observed that the McClellan Oscillator, a short-term market breath indicator, reached an overbought reading of 30 yesterday. While this does not necessarily signal the end of the rally, it does suggest that even as the STI continues its climb to 2900 post anticipated pullback to 2770, market internals should start to deteriorate That is, the easy money has been made, gains will become lesser broad based, time to be more selective.
OSIM's Chairman and CEO Mr Ron Sim made a voluntary unconditional cash offer for all the issued ordinary shares in the company. The offer price of S$1.32/share is at a 7.8% premium over the last traded price of S$1.225. We have previously upgraded OSIM to a BUY on attractive valuation, dividend yield and better earnings visibility post-4Q15 earnings. Our TP of S$1.28 was pegged to the average historical PE of 14x FY16F. Based on our VWAP analysis, we note that only 2010 and 2016 period VWAP of S$0.696 and S$0.964 came in below the offer price of S$1.32. Therefore, investors should try to hold out for a higher premium if possible. Downgrade to HOLD, keeping $1.28 TP
Courts Asia will issue S$75mil of notes, upsized from an initial target size of S$50mil, at a fixed rate of 5.75%/annum. Payable semi-annually and in arrear, the notes will be issued on March 15 and will have a three-year tenor. According to the CEO, all proceeds will be used to refinance their existing bond programme that is due in May this year, with the remaining being paid from the renewed securitisation programme and internal cash flow.
US stock indices rose moderately higher amid speculation that China's stimulus efforts will boost demand for commodities. Commodities and energy stocks led gains as Brent crude rose above USD40pbl. Energy stocks climbed as oil rallied on speculation producers may freeze output at current levels. Treasuries declined, pushing 2-year yields to the highest level since January.
Source: DBS
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