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CapitaLand (CAPL SP)

4Q16: Profits Rising In The East

CapitaLand posted better-than-expected results. Overall operating PATMI grew 55% yoy, boosted by contributions from Singapore and China residential projects. CapitaLand’s focus remains on core markets Singapore and China, despite management noting headwinds in these markets. Expansion of footprint in growth market Vietnam is also likely. Maintain BUY and target price of S$4.05, pegged at a 20% discount to our RNAV of S$5.06/share.


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ST Engineering: Electronics sector a key growth driver

Singapore Technologies Engineering’s (STE) FY16 revenue rose 5.5% to S$6683.7m, mainly driven by higher revenue from the Aerospace (+19%) and Electronics (+10%) sectors. However, group PBT fell 6.3% to S$590.6m, dragged by Land Systems sector (-66%) and Marine sector (-15%). As a result, FY16 PATMI fell 8.4% to S$484.5m. Excluding one-off impairment charge and divestment gain, core FY16 PATMI came in within expectations and would have been 1.2% higher at S$535.2m, which formed 99.0% of our FY16 forecast. Looking ahead, STE expects FY17 revenue to be comparable while PBT to be higher than FY16. However, stripping out one-offs from FY16, we expect FY17 PBT to be comparable, with lower PBT from Marine sector offset by higher PBT from Electronics sector. With in-line results, we keep our forecasts largely unchanged and introduce FY18 estimates. Maintain HOLD, with the same FV of S$3.20, supported by 4.4% forward dividend yield.


Lippo Malls Indonesia Retail Trust

Higher earnings from organic and inorganic drivers

■ FY16 earnings slightly ahead, boosted by new acquisitions and positive rental reversions

■ FY16 rental reversions healthy, up 6.3-7.5% over the previous period

■ We expect more rental uplift when recontracting the 23% of lease renewals due in FY17

■ Gearing of 31.5% provides good debt headroom for more acquisitions

■ Maintain Hold with a slightly higher TP of S$0.39


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Singapore Property

Eyes on new launches

 Jan 2017 primary sales rose 18% y-o-y, despite lower number of project launches

 Secondary sales flat; total sales 9% higher y-o-y

 Take-up rates on new launches an indicator of potential sustainable recovery

 News on potential M&As drove share price outperformance


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DBS Group (DBS SP)

Proactive steps

TP/EPS raised on higher loan growth assumption DBS’s FY16 core PATMI was in-line with our expectations. FY16 preprovision profits grew 10% YoY, which also underlies its ability to grow revenues and cut costs amid worsening asset quality. We raise FY17-18E earnings estimates by 10-11% to reflect mainly a higher loan growth assumption of 4% (from 2%). We also introduce FY19 estimates. Challenge would be maintaining/growing market share amid rising competition. Our TP is raised c.16% to SGD18.13 based on ~1.0x FY17E P/BV (from ~0.9x previously). Despite revisions, we maintain HOLD and await signs of a bottom in asset quality deterioration and/or rising rates.


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