Towards Financial Freedom
DBS Equity Research: Wired Daily 20 Apr 2016
STI - Near-term upside cap 2965, pullback to 2900 at least
USDSGD - Downtrend resume but watch important inflexion pt at/slightly above 1.32
OSIM - 1Q16 results below expectations due to declining sales in core markets. Maintain HOLD; TP lowered to S$1.39
The benchmark STI is currently just a hairline below our stated near-term upside cap of around 2965. The index's continued strength this week coincided with the decline in the USDSGD to a YTD low of 1.335. This suggests funds inflow as a result of the strong SGD.
The fall in the USDSGD came despite MAS's move last week to flatten the slope of the SGD NEER policy band. We had earlier stated that the 1.3565 was a crucial level that should hold up if the up spike last week signalled an end to the correction trend. Obviously by now, this did not materialize. Despite the latest price action signalling a resumption of the USDSGD downtrend, technically, we stick to our earlier view for the 1.32 level as a good level to bottom fish. Technically, we look for an inflexion point, from down to up, in the USDSGD at 1.32 or slightly above. If this happens, the current rise in the STI will stall.
With corporate earnings and economic outlook still uncertain and valuations approaching what we believe is fair under current conditions, we maintain our view for STI's near-term cap around 2965 and anticipate a pullback towards the 2900 level at least. We will change our technical view point only if the STI rises above 2980.
OSIM International reported 1Q16 results below our expectations due to declining sales in core markets. There was no quarterly dividend even though net cash and cash generation remained strong. This was a surprise as we had expected 1 Sct DPS payout this quarter. We cut our FY16-17F earnings by 5% each after 1Q16's earnings disappointment. A combination of higher operating costs and lower sales from a reduced number of stores resulted in lower than expected earnings. Maintain HOLD; TP lowered to S$1.39 (Prev S$1.46).
HPH Trust reported weak 1Q core net profit of HK$210m (-26% y-o-y), partly helped by rate refund of HK$357m. We have lowered our throughput growth assumptions for 2016F and thus cut our FY16F and FY17F core profit forecasts by 5.1% and 3.1% respectively. As a result, we have lowered our DPU forecasts for HPHT in these two years by 3.2%/3.3% to HK 30cts/HK 29.6cts. While a planned debt repayment programme from 2017F onwards could cap DPU growth in the medium term, a rebound in trade volumes and throughput as well as a stronger balance sheet thereafter could support longer-term expansion. Maintain BUY, TP: US$0.57 (Prev US$0.61).
CapitaLand reported a 35.4% increase in net profit to S$218.3m for 1Q16, buoyed by the fair-value gain from the divestment of a property in China. The China property, Somerset ZhongGuanCun Beijing, was divested for a cash consideration of S$125m. Revenue dipped 2.3% to S$894.2m mainly due to the absence of a fair-value gain of S$59.6m arising from the change in the use of Ascott Heng Shan Shanghai in Q1 2015, and lower contributions from the group's development projects in Singapore and Vietnam.
China Everbright Water has secured a public-private partnership (PPP) project for the construction of the sponge city in Zhenjiang, Jiangsu. This is a major step in venturing into the provision of comprehensive environmental services. Our analyst has revised up FY16 and FY17 earnings by 8% and 12% respectively. Maintain BUY with higher TP of S$0.69 (Prev S$0.64).
SMRT Corporation has formed a JV company with 2 Getthere Holding. Under the JV agreement, they will market, supply and operate automated vehicle systems in the Asia-Pacific.
Spackman Entertainment Group has entered into an agreement for the sale of its subsidiary Opus Pictures. Opus Pictures has been loss making since FY2014 and is in a net liabilities position as of 31 December 2015. The proposed restructuring will cut fixed overheads and operating expenses significantly. The Group is streamlining its core operations and resources to better focus on the profitable core business units Zip Cinema and Novus Mediacorp.
Source: DBS
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