ANALYSTS SAY: Buy, Sell, Hold (20 July 2017)

CapitaLand Commercial Trust (CCT SP)

2Q17: Reconstituting Portfolio For Long-term Growth

Results were in line with expectations. Management plans to undertake DPU stabilisation measures in 2H17 following the loss of income from the divestment of One George Street and Wilkie Edge. Golden Shoe carpark redevelopment is underway with targeted yield-on-cost of 5%. Office yield compression to upcycle levels presents significant upside potential with recent data pointing to a sector turnaround. Maintain BUY with an unchanged target price of S$1.90.

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Hutchison Port Holdings Trust: Throughput growth offset by ASP pressure

Hutchison Port Holdings Trust’s (HPHT) 2Q17 results were within expectations. 1H17 DPU dropped 32.1% YoY to 9.5 S cents, or 42.2% of our full-year forecast, which we consider within expectations. As a comparison, 1H15 and 1H16 DPU each made up around 46% of their respective full-year DPU. Throughput growth at both HPHT’s HK ports and YICT was offset by a drop in ASP. We continue to believe that HPHT’s deep water assets will offer it a comparative advantage in the coming years when streamlining measures by the alliances exert pressure on transshipment volumes. Nonetheless, the trust is currently trading 14.2% above our fair value and a 6.0% FY17F yield. Given the recent unit price appreciation, we encourage investors to take profit and downgrade HPHT from a Hold to a SELL at an unchanged fair value of S$0.42.

Banks

Initial Signs Of SIBOR Uptrend

Since the end of Jun 2017, the 3-month SIBOR has risen 12bps to 1.115%. This should underpin improvement in Singapore banks’ net interest income and widen NIMs going forward. We have already factored in wider NIMs for the three banks as we go into 2018. Our sensitivity analysis points to DBS’ earnings rising the most from a SIBOR increase, whilst the other two banks would also gain although at a slightly smaller magnitude. However, our sector Top Pick remains UOB given: 1. DBS’ share price outperformance with total shareholder return of 39% over the past 12 months, compared with OCBC’s 28% and UOB’s 32%; 2. UOB’s stronger balance sheet strength; 3. UOB’s ability to sequentially grow net interest income faster than peers over the past three quarters.

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