| MAYBANK KIM ENG | OCBC |
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Singapore Economics Electronics Driving Exports; Re-Export Trade Surges Export Momentum Continuing in Third Quarter
Trade numbers kicked off the second half with healthy momentum, led by electronics exports. Non-oil domestic exports (NODX) continued to post robust growth in July (+8.5% vs. +8.8% in Jun), which was led by electronics exports (+16.3%). Non-electronics growth (+5.2%) moderated as pharmaceuticals (-54%) plunged further. Non-oil re-exports, a proxy for wholesale trade services, surged by +17.5% from a year ago (vs. +8.3% in Jun), driven by both electronics (+26%) and non-electronics (+9.1%).
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SG Hospitality: 2Q Recap – RevPARs largely resilient For the REITs under our coverage, 2Q Hotel RevPAR growth ranged from -1.4% to +5% YoY. OUE Hospitality Trust’s (OUEHT) Mandarin Orchard Singapore made a strong recovery from its low base last year, while CDL Hospitality Trusts’ (CDLHT) and Far East Hospitality Trust’s (FEHT) hotel portfolios both recorded minimal declines YoY. Meanwhile, Ascott Residence Trust (ART) and FEHT’s Serviced Residence portfolios posted mid-single digit declines YoY in 2Q17. According to our forward estimates, hospitality REITs under our coverage are trading at 5.2% to 6.6% FY17F dividend yield and 6.0% to 6.7% FY18F dividend yield. Within the hospitality sector, our top pick remains OUEHT [BUY; FV: S$0.82] given its DPU growth prospects as well as its undemanding price levels. Given the recent compression in yields, we maintain NEUTRAL on the hospitality sector. |
| CIMB | |
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SmallCaps Small-cap performance to moderate in 3Q17F
■ Our 5 small-cap top picks outperformed the Straits Times Index (STI) for the period of 15 May-14 Aug 2017. ■ We now remove UMS and Sunningdale from our list of small-cap top picks. ■ New additions to the list this quarter are mm2 and Valuetronics. ■ mm2 has priced in the lapsed Golden Village Cinema (GV) deal and its S$157m war chest at 18 Jul 17 enables earnings growth via M&A and investment in productions. ■ In our view, Valuetronics could see further earnings upside as contribution from a new automotive customer kicks in in FY19F.
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| MAYBANK KIM ENG | UOB KAYHIAN |
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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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M1 (M1 SP) Near-term Headwinds Priced In
M1 has to contend with higher handset subsidies caused by the launch of iPhone 8 and 8 Plus in Sep 17 as well as stiffer competition with the impending entry of TPG Telecom in 2018. These near-term headwinds have been priced in with the stock correcting 25% over the past three months. M1 remains a takeover target should the industry consolidate from four to three players. Maintain BUY and cut target price to S$1.98 (S$1.55 if the network sharing with StarHub fails to materialise).
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Check out our compilation of Target Prices
