DBS Equity Research: Wired Daily 17 Mar 2016

kiasutrader

Publish date: Thu, 17 Mar 2016, 11:40 AM

STI - Positive reaction to FED's anticipated dovish stance but reaction upside capped around 2900

The FED left the Fed Funds Rate unchanged at 0.5% and signalled that interest rates won't increase as fast as previously forecasted. It now sees just 2 rate hikes by year end, down from 4 just back in December last year. Fed officials cited the potential impact from weaker global growth and financial-market turmoil on the U.S. economy for holding rates steady. The central bank lowered its median projection for U.S. growth in 2016 and next year. Bond yields fell and so did the USD while stocks and oil price rose.

Asia stocks are currently higher. We expect Singapore stocks to trade higher as well in reaction to the FED's overnight decision. Interest rates sensitive stocks such as property should gain, as well as O&M stocks as oil price rebounds. But the benchmark STI has rallied 10% since mid-February in anticipation that the ECB and FED will continue to stay supportive of growth at their respective policy meetings. Meanwhile, regional growth prospects remain uncertain and corporate earnings revision here are still on a downward path.

We maintain our view that near-term reaction upside should be capped around 2900, pegged at at 12.09x (-1SD) 12-mth forward PE. We see a more likely range of 2720-2920 for the STI in coming weeks CapitaLand Mall Trust proposed to change its performance fee. The proposed performance fee changes are as follows:

1. Existing formula: 2.85% of Gross Revenue for the relevant financial year

2. New formula: 4.25% of the Net Property Income for the relevant financial year

The change to the performance fee calculation is to comply with the new REIT regulations, which became effective on 1 January 2016. The new regulation specifies that performance fees should not be linked to the property fund's gross revenue.

Following the change, CMT's total management fee (inclusive of base and performance fee) as a percentage of total assets remains among the lowest in the SREITs space.

Wireless network solutions provider Consistel said that it would challenge MyRepublic for the right to become Singapore's fourth telco, amid a brewing telco war. Twentyyear-old Consistel, whose investors include Intel Capital and Jafco Asia, said it has appointed an investment banker to help it raise more than S$1 billion through a mix of equity and debt for its mobility bid. Consistel has built network infrastructure in reportedly 800 sites in Singapore, including at the Sports Hub and Marina Bay Sands, and in 5,000 sites regionally for a variety of operators.

GLPsigns a new 15,000 sqm (161,000 sq ft) lease with Akachan House, a leading e-commerce retailer for baby products in Japan. Demand for modern logistics facilities in Japan is driven by domestic consumption and consolidation trend.

Sunpower Group has secured a contract from Jiangsu Xinhua Semiconductor Materials Technology, which is a subsidiary of Jiangsu Zhongneng, to supply 34 reduction furnaces for semiconductor-grade polysilicon project. The Group has maintained a good strategic partnership with Jiangsu Zhongneng since 2009. The contract value is RMB97.6m and expected to be delivered in 2016. Besides, Sunpower Group has also secured a contract from Sinopec Shanghai Engineering to supply piping support in Inner Mongolia Province. The contract value is RMB18.5m and expected to be delivered in 2016. The winning of the contracts will have a positive impact on the Group's FY2016 results.

COSCO Corporation has secured a construction contract from an Asian ship owner to build one (1) Self-elevating Workover Unit with an option to build another similar unit. COSCO Nantong and the ship owner have agreed to keep the contract price confidential. The unit is scheduled for delivery in the 3rd quarter of 2017.

Singapore's non-oil domestic exports (NODX) bounced back from a 10.1% y-o-y plunge in January to rise 2.1% in February, beating market expectations of a 2.6% dip. But month on month, the NODX failed to extend the previous month's seasonal-adjusted 0.6% increase - the NODX fell 4.1% in February. Except for South Korea, Taiwan, Thailand, Malaysia, Indonesia and China, shipments to the rest of the top 10 markets rose. The EU, Hong Kong and Japan were the three biggest contributors to last month's expansion. The electronic NODX increased 0.7% y-o-y in February, after slipping 0.6% in January. The non-electronic NODX was also up 2.7%, reversing the 14.1% drop in the previous month.

Source: DBS

Sunpower (5GD)COSCO SHP SG (F83)

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