ANALYSTS SAY: Buy, Sell, Hold (17 Nov 2016)

Sembcorp Marine (SMM SP)

Disposes Of 30% Stake In Associate CSG

SMM announced the disposal of associate CSG to COSCO for S$220.7m which resulted in a net gain of S$48.3m. The effects are mostly positive as core earnings in 2017-18 will improve on top of a reduction in net gearing. Our core earnings forecast for 2016 remains unchanged, but our 2017-18 forecasts have increased by 6%. Target price is revised up to S$1.26 as a result. Maintain HOLD. Entry price: S$1.24

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Ezion Holdings - Lays Ground for Possible Upside (BUY, TP SGD0.42, EZI SP)

Swissco could file for Judicial management as its proposed bond restructuring did not garner bankers' Support. Ezion has 3 drilling rigs and an accommodation rig under 50% JV with Swissco. According to Swissco, Ezion has offered to buy their share of the 3 drilling rigs for SGD4.5m and assume all outstanding debts. This may seem negative from the
perspective of additional debt and cashflow, but could lay the groundwork for upside from potential cash collections and better future
profitability.

Yoma Strategic

Catalysts: The key catalyst would be clarity on the Condominium Law, which would enable overseas buyers to purchase homes in Myanmar. The government is expected to unveil a raft of detailed regulations and procedures by December 2016. Other catalysts include signing up new franchisee or distributorship licences in its F&B and automotive businesses.


Valuation: We initiate coverage with a 12-month TP of SGD0.73, based on a 30% discount to our SOTP valuation of SGD1.04. Our SOTP includes the present value of residential sales, the revaluation of its undeveloped land bank and investment properties, as well as ascribing earnings multiples to its other businesses. Notably, Landmark, which contributes 30% of our SOTP valuation, would only generate revenue from FY21 onwards.

Telco: Downgrade to NEUTRAL with 4th Telco entry

Hence, we are downgrading the Telecom sector to NEUTRAL with the incumbents’ earnings likely to be eroded as they lose market share over time, especially in Singapore’s market where mobile telecom business has reached low growth stage (at ~150% mobile penetration rate). In our view, among the incumbents, Singtel [BUY; FV: S$4.51] remains our sector top pick, as we expect it to be the least impacted given its limited Singapore exposure, strong enterprise segment and exposure to regional associates. We expect M1 [HOLD; FV: S$2.25] to be the most impacted given its 100% Singapore exposure and with ~90% of its 9M16 revenue derived from Singapore’s mobile telecom segment. For Starhub [HOLD; FV: S$3.30], given its 100% Singapore exposure as well, we expect the impact to be larger than Singtel but smaller than M1 due to its enterprise segment and Pay TV bundling option used to retain customers.