ANALYSTS SAY: Buy, Sell, Hold (9 June 2017)

China Aviation Oil

Hitching a ride on China’s outbound journey

■ A global forum held in May reaffirms China’s ‘One Belt, One Road’ initiative. “Internationalisation” and aviation infrastructure improvement remain priorities.

■ CAO is a prime beneficiary given strong parentage - China National Aviation Fuel Grp (CNAF) - and business model that is firmly intertwined with China’s aviation industry.

■ CAO’s core jet fuel supply division benefits from growth of Chinese carriers’ long-haul routes. Existing strategic alliances will further facilitate geographic expansion goals.

■ Capacity enhancements in FY17-19F are key future growth drivers for SPIA. Moderate yet steady growth expected for SPIA in the meantime (FY17-18F).

■ Maintain Add with a marginally lower target price, based on FY18F P/E of 13x (19.5% discount to peer average).

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StarHub Ltd: Strengthening cyber security capabilities

StarHub Ltd (Starhub) recently announced an agreement to acquire a 51% stake or 11.7m (sale shares) in Accel Systems & Technologies Pte. Ltd. (ASTL) for a total consideration of S$19.4m, which will be paid in cash funded by internal resources, and is expected to close by mid-Jun 17. The acquisition will allow it to provide a full in-house suite of cyber security solutions and services to its customers. We recognise that cyber security demand will continue to register strong growth, as it is identified by the Singapore Committee on the Future Economy as one of the high growth industries. In our view, while it makes sense for Starhub to strengthen and diversify away from consumer business towards enterprise business, we think it will take time to build up its cyber security capabilities before it gains significant traction in this business. Over the near to medium term, we continue to expect a lack of catalysts for Starhub. For now, we opt to keep our forecasts unchanged. On weaker EBITDA margins ahead given the aforementioned reasons, maintain SELL on Starhub with an unchanged FV of S$2.40.

MAYBANK KIM ENG

Singapore market monitor

Growth ahoy? (!)

Improving confidence in corporate growth recovery The March 2017 results quarter provided us with an inflection point for core profit growth after many successive periods of decline. Consensus FSSTI EPS expectations also seem to be quite moderate suggesting the downgrade cycle is likely at its tail end. We raise our 12 month index outlook and believe valuations could still hold some headroom yet. Property and Healthcare are our top sector preferences and we highlight key stock picks from within these two sectors.

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Breadtalk Group Ltd

CHIJMES/AXA could be sold Maintain BUY and S$1.92 TP. We reiterate BUY on BreadTalk as we believe its earnings will continue to turn around and deliver growth. 1Q17 earnings have validated that its Foodcourt business is on track for a turnaround. Apart from earnings growth, we see potential catalysts from the possible sale of AXA Tower/CHIJMES and revaluation of Beijing Tongzhou Development. BreadTalk’s valuation, based on its core business (ex-property investments), is compelling at 16.2x FY17/18F PE.

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Singapore Press Holdings (SPH SP)

Page Count Points To Further Weakness In 3QFY17 Print Revenue

Our page count shows total ads in 3QFY17 declining 13.7% yoy, coming in below 1QFY17 levels in a reversal of historical trends. We forecast print revenue to further decline by 15% (previously -10%) on worse-than-expected deterioration. A bottoming in earnings remains elusive for SPH. It is also still too early to bet on a healthcareled turnaround as earnings contributions are insufficient to offset the decline in the media business. Maintain SELL with a lower target price of S$2.90.

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