| CIMB | OCBC |
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Offshore & Marine Oil circular reference ■ We project a higher crude oil price range of US$45-60/bbl in 2017F. ■ However, we view a price of above US$60/bbl as unlikely in view of the new US “Energy Independence” policies that could numb market-rebalancing efforts. ■ We foresee that shallow water P&M activities will be prioritised, with OSV players first to see improved utilisation. Yards are likely to lag due to asset glut. ■ We upgrade sector from Underweight to Neutral, largely on valuation grounds. ■ We like CSE Global, Ezion and MMT for their healthier balance sheets and/or ability to survive uncertain times, in our view. For large caps, we prefer Sembcorp Marine.
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SPH REIT: Steady as she goes SPH REIT has consistently delivered stable financial results since its IPO, with DPU increasing at a CAGR of 0.6% from FY14 to FY16. Although this figure appears unexciting, we believe the stability offered provides defensiveness and creates value for investors in this current lacklustre and uncertain macroeconomic climate. SPH REIT also has the lowest gearing ratio (25.7% as at 31 Aug 2016) within the S-REITs universe. 85.9% of its debt is on a fixed rate basis, with no refinancing requirements till 2018. Following its recent share price correction, SPH REIT is currently trading at FY17F distribution yield of 5.9%, which is approximately one standard deviation above its average forward mean since its listing; while its yield spread against the Singapore government 10-year bond yield is also undemanding at 355 bps (+0.6 standard deviation above historical average). Reiterate BUY on SPH REIT, with a slightly higher fair value estimate of S$1.06 (previously S$1.05). |
| MAYBANK KIM ENG | |
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Singapore Banks No Change In Fundamentals Sentiment driven rally; Reiterate sector Negative Since Trump’s victory in Nov-16, Singapore banks have rallied ~8-18% on expectation US fed fund rate will normalize, and due to oil and USD strength. But fundamentally, our outlook has not changed. In fact, Oct system data further validates our negative view on the sector. System loans contracted 2.2% YoY in Oct-16, its longest streak of contraction since 2005. System NPL ratio rose to 2.1% as of Sep’16 (Sep’15: 1.5%). Over the next few quarters at least, we think banks will focus on driving revenue and cost containment as asset quality is worsening (link).
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| PHILLIP SECURITIES | UOB KayHian |
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Old Chang Kee Ltd. Good things take time SINGAPORE | CONSUMER | RESULTS 1H FY17 Revenue/NPAT met 50.1%/48.6% of our FY17 full year forecasts Signs of bottoming out and momentum could extend into 2H FY17 with gross margin sustaining at c.63% Maintain our view of 2.8% yoy growth in FY17 NPAT after two consecutive years of contraction Declared interim dividend of 1.5 Cents per share, same as 1H FY16
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STRATEGY – SINGAPORE Alpha Picks: Month Of Change But No Change To Alpha Picks November saw Trump’s election win but no changes to our Alpha Picks. We believe China Aviation Oil will benefit from the US$ strength while share price drop in Keppel T&T was unwarranted. Also, Duty Free International may begin to find support as oil prices (and the ringgit) stabilise. WHAT’S NEW • Trump’s win in the US elections and the subsequent strength in US$. November saw Donald Trump winning the US presidential elections and the subsequent surge in the strength of the US$. • Alpha picks remain. Ytd, all of our alpha picks outperformed the FSSTI (except for Starhub with a SELL). However, share prices for all our picks except Bumitama fell in November. We believe Keppel T&T’s (KPTT) price drop was unwarranted while Duty Free International’s (DFI) share price may start to find some support as oil prices stabilise (and hence the ringgit).
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Check out our compilation of Target Prices
