DBS Equity Research: Wired Daily 10 Mar 2016

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Publish date: Thu, 10 Mar 2016, 03:45 PM

ECB policy meeting - Anticipated changes largely factored in

Singapore Telecom Sector - MyRepublic launches its data plans

The European Central Bank meets today and expectations are high that the authorities will up the game in providing further monetary stimulus. Policy action is expected to be a combination of a further cut in the deposit rate by another 10bps to -0.40%, expand the range of assets to buy, and/or increasing bond purchases from the current size of EUR 60bn a month. Our economist notes that these changes are largely factored-in, with an element of surprise necessary to improve the potency of policy actions.

MyRepublic will launch 2GB plan at $S8/month for new customers and an unlimited data plan at S$80/month if it secures spectrum in 3Q16. These targets low-end and highend users as well as appeal to niche customers who want cheaper plans and don't mind lower network coverage for a few years initially. We estimate 24% and 12% ROI for MyRepublic, depending on the EBITDA margins. Our basecase TP of S$2.60 for M1 assumes a 10% adverse impact on M1's revenue due to the entry of a fourth player in 2022, compared to its revenue in 2015. Our base-case TP of S$3.30 assumes a 4% adverse impact on StarHub's revenue due to the fourth player in 2022, with EBIT margins falling to 18% versus 20% currently.

Subsequent to its initial 12% acquisition in Gravifloat on 2-Jun-2014, SembCorp Marine announced that it has acquired an additional 44% equity stake for US$38m. This will bring its stake in Gravifloat to 56%, making it a subsidiary of SMM. Under the agreement, SMM will eventually increase its stake by a further 44% to 100% through an equity purchase at the same price.The consideration will be funded by internal cash. This was arrived after taking into account (i) the NTA of US$475k as at end 2015, (ii) the intellectual property rights and the prospects of commercialising the design, and (iii) SMM's gain of control of Gravifloat.

Update on Dairy Farm's company guide - We maintain our BUY rating with an SOTP-based TP of US$7.03. DFI trades at an attractive valuation of 17.9x FY16F PE at -1SD of its 7-year mean. With no major negative surprises in FY15 results, we continue to be positive on the stock. Strategies like DC enhancements and inventory management systems are being put in place to turn more efficient. We expect growth to pick up in FY17F. The share price now values DFI's core business at just 20x PE.

U.S. stocks rose ahead of the ECB's decision on monetary policy tonight and the FOMC meeting next week on continued optimism that central banks will ease monetary policies to in the attempt to lift sluggish growth. Energy stocks led gains as oil price rebounded.

Source: DBS

StarHub (CC3)Sembcorp Marine (S51)DFIRG USD (D01)

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