Towards Financial Freedom

DBS Equity Research: Wired Daily 3 May 2016

kiasutrader
Publish date: Tue, 03 May 2016, 10:10 AM


OCBC - Limited upside coupled with cloudy outlook; downgrade to HOLD

Mapletree Logistics Trust - Downgrade to HOLD with lower TP of S$1.10

Indofood Agri Resources - Rating cut to HOLD on limited upside potential

1Q16 earnings for OCBC were broadly in-line; results would have been better if not for a significant decline in its insurance contribution and higher provisions. Total oil & gas exposure at 6% of total loans; the bulk of the new nonperforming (NPL) formation was from this sector. NIM is expected to stay flattish while loan growth is likely at low single digits for 2016. At current price, there is limited upside to our TP of S$9.40. Coupled with the cloudy outlook for Singapore banks, we downgrade the stock to HOLD.

4Q16 DPU for Mapletree Logistics Trust in line with our estimates but below consensus forecast. The conversions of single-user to multi-tenanted properties is likely to result in margin pressure. Acquisitions and developments are expected to drive growth but is limited by high gearing of close to 40%. We downgrade our call to HOLD with a revised TP of S$1.10 (Prev S$1.15). We see further margin pressure posing downside risk to estimates, if the operational environment worsens.

1Q16 underlying net profit for Indofood Agri Resources below expectations on annualised basis. Output growth guidance reduced to flat this year. FY16F/17F earnings revised -1%/+2%. Rating cut to HOLD on limited upside potential to our revised TP of S$0.54 (Prev S$0.52). Yangzijiang's 1Q16 results broadly in line; shipbuilding margins held up at 23%. We expect minimal financial impact from the termination of eight bulker orders, buffered by 10-30% payment collected. FY15 final dividend of 4.5 Scts going-ex on 4 May; translating to 4.5% yield. Reiterate BUY; TP of S$1.25.

Japfa's 1Q16 underlying earnings of US$24.4m were ahead of our expectations on an annualised basis, driven by higher contributions from Animal Protein outside Indonesia and Dairy segments. Japfa Comfeed's contribution shrank q-o-q on moderation in feed margin, commercial farm loss. Forecasts unchanged, TP of S$1.10 (Prev S$0.90) as we rolled over to FY17F base year. Maintain BUY for 57% upside.

Venture's 1Q16 net profit of S$ 36m (+10% y-o-y) was at the upper end of our estimates while operating cash flow was significantly above our estimates. Growth segments are much bigger (39% of total) than the declining segments (16% of total) now. The rise in minimum wages and foreign worker levies in Malaysia is not a big concern, contrary to our previous view. Maintain Buy with an unchanged TP of S$9.00 for potential returns of 13% including 6% yield.

1Q16 results for iFAST below amid negative market sentiment and business expansion plans. We cut AUA growth to flat for FY16F and 5% for FY17F (from 5% and 10% respectively), given the weak market sentiment. Coupled with higher expenses as the company invests in IT to further enhance its platforms for additional product offerings, especially for its China operations, our earnings for FY16/17F are reduced by 24%/30%. Maintain BUY, but TP is reduced to S$1.38 (Prev S$1.45).

1Q profit for China Merchants Hldgs(Pacific) grew 15% to HK$164m, despite weaker RMB, led by strong growth at Yongtaiwen E'way. Its newly acquired roads in Guangxi also boost profit. Maintain BUY, TP S$1.25.

We issue an Equity Explorer report on China Aviation Oil, which is a niche downstream energy play, rather than an oil trading firm. Its investments in subsidiaries provide earnings stability, with further upside as net cash of c.37 Scts per share could fuel M&A opportunities. Our fair value of S$1.04 is based on a combination of PE and P/BV methodologies.

Centurion Corporation has entered into an agreement to acquire four student accommodation assets in well-regarded university cities in the United Kingdom for a total purchase consideration of £20.1m (S$38.9m). The new assets will strengthen its student accommodation portfolio with the addition of another 519 beds, and bring its total number of student beds to 3,208 across the UK, Australia and Singapore.

Source: DBS
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