The Company wishes to inform shareholders that the Company has been approached by parties in
connection with a possible transaction, which may or may not lead to an offer for the shares of the
Company. Discussions are on-going and there is no certainty whatsoever that these discussions
will result in any transaction. The Company has appointed Rippledot Capital Advisers Pte Ltd as its
financial advisor in connection with such approaches.
Financials: Top pick DBS, Top Avoid UOB. Deposit growth has slowed, while rate normalization should reverse the NIM compression seen over the past five years. Asset quality moves will be very specific, while the overall slowdown in the
Singapore economy (our Macro Error Index remains negative) will likely reduce credit demand and pricing power. Be selective vs avoiding the sector, however, as outstanding short interest shows a good short-term trading opportunity.
Oil & Gas: Top Pick PACRA, Top Avoid SMM. Capex is shifting to production from exploration; this favors asset owners vs asset builders. The Offshore Support Vessel Segment hits both criteria. Asset builders such as SembCorp Marine, and to some degree Keppel, look poised to underperform.
Consumer/Gaming: Top Pick SSG, Top Avoid GENS. Overall consumption spend is struggling, so we focus on specific situations. SSG is driven both by market-share gains and efficiency improvements. GENS has seen stagnant growth in mass market revenues, and the credit-fueled push on VIP has now driven bad debts higher.
Infrastructure/Transport: Top Pick STE, Top Avoid NOL. Air travel/cargo volume growth to continue but pricing impacted by supply; better to play through maintenance operators like STE (leveraged into older fleets in the US). Net shipping vessel growth is accelerating to 7% from 5% net of scrapping, which should overwhelm short-term pricing improvements. NOL to post losses through 2016.
Telecom/Media: Top pick M1, Top Avoid STH/SPH. Two themes driving Telecoms – improvements in wireless data pricing vs rising competition in fixed broadband. Overall AdEx trends continue to deteriorate, in line with other signs of weak domestic consumption.
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