DBS Equity Research: Wired Daily 26 Apr 2016

kiasutrader

Publish date: Wed, 27 Apr 2016, 10:51 AM

Raffles Medical - 1Q16 results in line. Maintain HOLD, TP S$4.30. Resilient model but current valuation priced in positive attributes

Yesterday's decline among Singapore blue chips was not surprising given (1) the STI recovery over the past 2-3 months that lifted valuation to above the 12.09x (-1SD) FY16/FY17 PE level of 2900 (2) weak 1Q earnings season and (3) the uncertainty ahead of FOMC meeting outcome this week. These factors led to profit taking. Attention is on what the FED may hint with regards to when the next rate hike will be and how fast it can go up. If the FED continues to paint a "cautious and data dependent" approach, the USD will stay pressured and the liquidity inflows will continue. In this case, the Singapore equity market can remain buoyant despite the uninspiring corporate results season thus far. However, should the FED's comments be perceived as more 'hawkish', the USD will strengthen and the funds inflow to this region could come to a screeching halt.

STI's pullback off 2965 is in line with our technical expectation. We peg a range of 2800 to 2965 in the month ahead with support along the way at 2860. Immediate resistance is seen at 2930.

Raffles Medical's 1Q16 net profit registered a growth of 3.7% to S$15.5m, while revenue grew by 23% y-o-y to S$116.9m, within expectations. The strong growth in revenue was equally helped by recent acquisitions, as well as contributions from its Healthcare Services and Hospital Services divisions. We are projecting a core net profit growth of about 5% for FY16F, but this is lower than consensus' mean expectations of c.10% growth. Management still expects to register growth but noted the "measured pace of growth" may have an effect on healthcare demand. We maintain our HOLD recommendation with an unchanged TP of S$4.30. While we like the Group's relatively resilient model and its exposure to the healthcare sector, we believe its current valuation at 36.5x/34.5x FY16F/17F PE has largely priced in the positive attributes.

3QFY16 DPU for YTL Starhill Global REITflat, despite contribution from new asset Myer Centre Adelaide. Weaker occupancy at Wisma and depreciation of MYR vs SGD dragged performance. Toshin rent review in June 16 presents upside to DPU; bull-case scenario implies a further 5% boost. Maintain BUY with 12% total return to our S$0.84TP.

Great Eastern Holdings, the insurance arm of OCBC Group, reported a net profit of S$96.9m 1Q16, down 56% y-o-y. The weaker performance was due mainly to unrealised fair value losses from the valuation of assets and liabilities in the insurance business amid unfavourable financial market conditions. Results for OCBC will be released on Friday, 29 Apr.

SBI Offshore is venturing into a solar photovoltaic energy project to develop solar photovoltaic power plants in Hopetown, South Africa. The Hopetown Project will initially supply 50 megawatt of power to the local municipality and may gradually be scaled up over the next ten years to 1,000 megawatt for the regional needs. Construction of the initial phase is expected to commence in the second half of 2016 and is envisaged to take about 12 months to complete. The Hopetown Project will be undertaken by a subsidiary to be set up in South Africa with a local partner who will hold a minority stake.

Nordic Group has recently clinched several contracts with a total value of approximately S$7.2m. The contracts are secured with repeat customers - comprising of multinational companies (MNCs) and companies in the marine, oil & gas, pharmaceutical and process industries.

Moody's Investors Service has upgraded the issuer rating of Frasers Commercial Trust (FCOT) from Baa3 to Baa2 with a stable outlook. Moody's said the upgrade reflects the sustained strengthening of FCOT's financial profile, driven by its prudent financial management and healthy operating performance. The stable outlook reflects Moody's expectation of predictable cash generation from FCOT's properties, supported in turn by steady occupancy and manageable lease expires.

The Singapore consumer price index (CPI) for all items eased further to -1% in March, from February's -0.8%. This was due to a "significant decline in private road transport cost". At its 17th straight month of decline, March's softening prices would make it the longest period of decline on record, and the steepest fall in recent months. Core inflation - which excludes accommodation and private road transport costs - was at 0.6% in March, slightly higher than February's 0.5%, due to higher food prices.

Source: DBS

Great Eastern (G07)SBI Offshore (5PL)Nordic (MR7)

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