ANALYSTS SAY: Buy, Sell, Hold (17 Aug 2017)

Singapore Strategy

Old economy is out, new economy is in

■ Singapore corporates are increasingly being disrupted by asset light, lower cost new economy disruptors.

■ 2Q17 results were a mixed bag. Although there were more misses than beats, bulkier earnings upgrade still led to overall market earnings upgrade of c.2% qoq.

■ We streamlined our Alpha picks, whittling the list down to 10 names that should still see more than 10% upside in the next six months.

■ Maintain OW on property, tech and gaming; downgrade consumer sector to Neutral.

■ Alpha picks: UOL, Capitaland, Genting, Wilmar, SCI, AEM, HMI, Memtech, mm2 and Valuetronics.

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STRATEGY – SINGAPORE

2Q17 Report Card – Pockets Of Solid Outperformances

2Q17 results saw a higher number of beats with several sectors including banks and exporters delivering solid earnings. Our 2017 market EPS growth forecast has been revised to 8.5% (from 6.6% previously). Following the earnings revision, our target for FSSTI has been revised to 3,410.

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CNMC Goldmine Holdings Limited

Expect a turnaround next year

SINGAPORE | MINING | 2Q17 RESULTS

 Revenue and net profit missed our expectations due to a substantial drop in sales volume of gold resulting from lower ore grades.

 1HFY17 output has been a disappointment. We cut our earnings forecast by 84.6% for FY17e but raise earning forecast by 17.7% for FY18e respectively. Similarly, we lower our TP to S$0.29 (previous: S$0.44), and we downgrade our recommendation from BUY to NEUTRAL. We are upbeat on gold prices and expect the current lacklustre production to recover in FY18.

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GuocoLand (GUOL SP)

Riding the Singapore Upcycle

Tap Singapore’s upcycle via this laggard – 39% upside

We initiate coverage on under-researched GuocoLand at BUY and SGD2.75 TP, implying a 22% discount to RNAV of SGD3.55. We believe its small free float, lower trading liquidity and limited analyst coverage are technical reasons for the underperformance and steeper valuation discount when compared to its larger peers. Fundamentally, we see a company with improving financials and attractive valuations. The stock trades at a 44% RNAV discount and 0.67x P/BV. Key risks could arise from a sharp fall in property prices in Singapore and China.

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Tat Hong Holdings: A mixed outlook remains

Tat Hong recently reported its 1QFY18 results, which reflected softness with some bright spots. Revenue was up 1% YoY to S$118.3m and was 7.4% higher QoQ. The group recorded a slightly lower pre-tax loss, but saw a higher net loss of S$5.1m vs. S$3.6m in 1QFY17 mainly due to an absence of tax benefits for this quarter. Management has noted some early signs of a turnaround for its Australian subsidiary and the group also expects continued healthy demand in China, which is supportive for the Tower Crane Rental Division in China. However, ASEAN countries are still facing market weakness and competitive pricing pressures. Thus the group will continue fleet rationalization initiatives. In consideration of the above, we revise our estimates and lower our FV from S$0.40 to S$0.37, maintain HOLD.