Towards Financial Freedom
DBS Equity Research: Wired Daily 5 May 2016
STI - Near-term inflexion c.2750, rebound resistance 2835
Small Mid Cap Monthly - Prefer high-yield names like UMS and CMPacific; continue to favour Japfa and mm2 Asia for their strong earnings outlook. Top SELL is Nam Cheong
Sembcorp Industries - 1Q results below; trimmed FY16-17F earnings by 6-8%. Reiterate BUY with lower TP of S$3.10
US markets and emerging markets fell; the USD rebounded further on continued concerns about tepid global growth. Sentiment was also affected by the softer-than-expected private sector ADP employment change figure (consensus 195k, actual 156k). In Singapore, the STI fell below our stated near-term support level of 2780 yesterday. While deeper than initially expected, we peg the next support level at 2750, which coincides with a short-term Fibonacci projection objective as well the 50% downward retracement level of the February to April rally. Rebound resistance is at 2835.
Led by Japfa (+20%) and mm2 Asia(+10%), our Small Mid Cap picks gained 5.5% over the last four weeks, outperforming the market. As volatility is likely to increase, we continue to prefer high-yield names like UMS Holdings and China Merchants Pacific. We continue to favour Japfa and mm2 Asia for their strong earnings outlook. Our top SELL idea is Nam Cheong, as the company's earnings face significant downside risk. Meanwhile, other names like COSCO Corp and Mermaid are also expected to report weak earnings.
1Q16 results for Sembcorp Industries below expectations, dragged by underperformance of Semb Marine and TPCIL. Contribution from Marine profit had halved to S$33.5m. TPCIL, its first Indian power plant that has been fully operational since Sept-2015 - which we had earlier projected to post S$10-15m profit in the quarter, was merely at breakeven due to the weak spot market. We trimmed FY16-17F earnings by 6-8%. TPCIL is expected to contribute more meaningfully in 2H16. Reiterate BUY; TP adjusted to S$3.10 (Prev S$3.30).
Fraser and Neave (F&N), through Fraser & Neave Holdings Bhd (F&NHB), its 55.5% held subsidiary, will inject over $70m (RM210m) in capacity expansion to fuel business growth in Malaysia. These capital expenditure projects, which include a new aseptic cold-filling polyethylene terephthalate (PET) bottle, ultra-high temperature processing (UHT) lines and a warehouse facility, will boost F&NHB's total asset value in Malaysia to RM1.9 bn.
iFASThas formed a 25%/75% JV Company with PC International. PC International is incorporated in Hong Kong and is an affiliated company of Paochu Investment Advisory Ltd and PC Securities Ltd. The incorporation of a JV Company will enable the Group to increase business from offshore customers who wish to invest in the investment products distributed on its Singapore platforms.
AnnAikhas been awarded additional service concession rights to construct and operate a wastewater treatment plant in LiJiaXiang Town, China. The concession rights shall continue for a period of 30 years from the commencement of commercial operation of the plant. The construction of the plant is expected to be completed by October 2016. The total investment for the project is estimated to be up to RMB20m.
With world trade slowing, leading global firms are turning to foreign direct investment for growth opportunities, and Singapore is one of the biggest targets. Confidence in Singapore has surged among key corporate decision-makers, according to A T Kearney. Singapore made the biggest jump in the global management consulting firm's latest Foreign Investment Confidence Index, rising from 15th in 2015 to 10th this year in its annual rankings. The US remains in the top position, followed by China.
Source: DBS
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