|PHILLIP SECURIITES||MAYBANK KIM ENG|
The Monetary Authority of Singapore (MAS) has announced changes in measures regarding the purchase and sale of properties in Singapore. These measures will be effective from 11 March 2017 and include:
What is the new rule? From 11 March 2017, MAS has revised the TDSR framework and it will no longer apply to homebuyers with mortgage equity withdrawal loans with an LTV ratio of 50 percent and below. According to MAS, the revision came from feedback of existing homeowners stating that the current TDSR framework has limited their flexibility to monetise their properties in their retirement years.
Surprise Review of Property Cooling Measures
Potential positives from change in policy measures
We believe surprise changes to the property cooling measures have positive implications for Singapore’s residential market. In particular, relief from changes to the Seller’s Stamp Duties could nudge the marginal buyer concerned with potential penalties to buy a new property. This could have positive impact on sales volumes and prices. However, we believe the market should curb their enthusiasm as home buying demand will remain constrained by the ABSD, LTV and TDSR requirements. At the margin, we see upside risks to our home sales volume and price assumptions. CDL and Wing Tai have the biggest exposure to Singapore’s residential market.
Health Management International
Healthy vital signs
■ HMI is one of the top 5 private hospital operators (by number of licensed beds) in Malaysia, with 10% market share of the nation’s medical tourism.
■ Poised to benefit from rising medical tourism, ageing demographics and increasing insurance penetration in Malaysia, in terms of higher average bill size and patients.
■ Full consolidation of minority interests in both of its hospitals would create an enlarged entity to tap into wider financing options and M&A opportunities.
■ Initiate coverage with Add and a DCF-derived TP of S$0.81 (7% WACC, 3% LTG).
■ Currently trades at 50% discount to CY18F industry average of 19.1x EV/EBITDA.
SG Residential Sector: Carefully calibrated set of policy changes
The Singaporean authorities announced last Friday that they have relaxed some property cooling measures relating to the seller’s stamp duty (SSD) and the total debt servicing ratio framework (TDSR). On the other hand, a new stamp duty, the Additional Conveyance Duty (ACD), will be levied for the transactions of residential properties held in property holding entities (PHE) via share sales. On balance, we believe these set of changes will be marginally supportive of still-declining home prices. In our view, the timing of these reversals was not a complete surprise. As we have been highlighting to our clients over the last few months, the Singapore government has over the last three cycles a near unbroken record of actively reviewing property legislations against its goals of price stability, and historically began reversing curbs after homes prices had dipped between 8%-17% from the peak (see OCBC report: “Severe dip in home prices unlikely”, 9 Dec 2016). We are currently down 11% from the last peak over the last 13 quarters. With these latest sets of measures, we now adjust our forecast for physical prices to decline to 1% - 5% in 2017 (versus our previous forecast for a 3% - 7% decline). Our top picks are UOL Limited [BUY, FV: S$7.30], Wing Tai [BUY, FV: S$2.37] and Wheelock Properties (SG) [BUY, FV: S$2.27].
Del Monte Pacific
US operations still not up to par
Maintain HOLD, improvement in US operations and deleveraging are key catalysts.
We maintain our HOLD recommendation on DMPL with a revised TP of S$0.36. While its Asia Pacific operations are posting strong growth, we believe firmer performance from its US operations (DMFI) and the fruition of its deleveraging plans are keys to the re-rating of the counter. 3Q17 core earnings in line, helped by tax credits. Del Monte Pacific Limited’s (DMPL) 3Q17 core earnings were within expectations, helped by tax credits. Headline net profit was at US$8.5m, showing a reversal from loss of US$4.8m last year. Group revenue improved marginally by 0.3% to US$604m, helped by Asia Pacific operations, partially offset by its US operations. EBIT was up by 92% to US$28.4m. In 3Q16, there was a one-off expense amounting to US$12.4m. Excluding that, recurring EBIT would still have grown by 25% y-o-y. That said, the recurring operating profit was behind our expectations largely arising from a weaker-than-expected performance from its US operations.
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