DBS Equity Research: Wired Daily 6 May 2016

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DBS Equity Research: Wired Daily 6 May 2016

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Publish date: Fri, 06 May 2016, 02:00 PM

Remove Wilmar International from Blue Chips portfolio

Starhub - Solid earnings but less exciting operating metrics, Fully Valued TP $3.30

POSH - Jostling amid weak environment, Hold TP $0.35

Starhub reported 1Q16 net profit of S$92.8m that made up 25% of our full-year forecast, slightly better than our S$88-90mil estimate due to large cost savings. Mobile segment gained subscribers but Pay TV segments lost 8k subscribers to 528k as it stopped the "TV Lite" promotions. Netflix also entered the market in early 2016, so it can also be attributed to Netflix's entry in our view. Management maintains its 20-Sct dividend guidance for 2016. We retain our Fully Valued call with unchanged TP of S$3.30.

PACC Offshore Services Holdings (POSH) reported an 18% q-o-q drop in revenue to lower day rates at the OSV segment but the bottom line was boosted by a recovery in performance at the JV level, in-line with expectations. Our forecast remains mostly unchanged. We expect net profits of US$11m and US$22m in FY16 and FY17 respectively, translating to an ROE of 1-2%, which is reflective of the weak offshore asset environment that we think will persist. We are however comfortable with POSH's balance sheet position, its ability to maintain utilisation at relatively high levels, and recent initiatives to penetrate the Middle East market. POSH's balance sheet remains relatively strong and it has also managed to refinance existing loans on attractive terms. We maintain our HOLD call, adjusting our P/BV peg upward a notch (from 0.4x to 0.5x) to reflect peer valuations and the recent upswing in oil prices. We now have a TP of S$0.35.

1Q16 net profit for Riverstone was relatively flat (+0.6% yo-y to RM$27.2m) at 17% and 19% of our FY16 estimates and consensus' estimates respectively, primarily impacted by net foreign exchange loss of c. RM$3m. Revenues grew 16.5% y-o-y to RM148.1m, in line with our full year forecasts, helped by higher volumes and improved utilisation but partly offset by continued pressure on ASPs. Gross margins also held up relatively well, at 29%, despite the gas hike and higher butadiene prices. More updates to follow later.

US stocks and oil price dipped ahead of tonight's closely watched April employment numbers. While Fed officials signalled in recent days that rates could rise as soon as June, consensus expects only a 10% probability for such a move as recent data indicated the economy remains sluggish. Meanwhile, the USD edged higher, which led to a dip in EM markets and commodities.

Model Portfolio update - A note that we removed Mapletree Logistics Trust from the Dividend portfolio on 3 May following our analyst's downgrade of the stock to Hold. We are removing Wilmar International from the Blue Chips portfolio as upside to TP of $3.85 looks fairly limited following the price gains in recent months. The stock gained nearly 19% since its inclusion into the portfolio on 11 Feb, outperforming the STI.

Source: DBS

StarHub (CC3)Riverstone (AP4)Mapletree Log Tr (M44U)Wilmar Intl (F34)

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