|MAYBANK KIM ENG
Boosted by China residential
■ 1QFY6/18 net profit was above our expectations, making up 94% of our FY6/18F forecast
■ Singapore projects continued to do well with higher take-up rates
■ Changfeng Residences boosted China earnings, but we expect growth to taper off in 2HFY6/18F
■ We anticipate higher rental income from 2HFY6/18F
■ We maintain our Add rating with a slightly higher RNAV-based TP of S$2.82
Singapore Medical Group (SMG SP) Two-pronged growth strategy
Acquiring one and hiring four new specialists SMG will be acquiring its third paediatric clinic for SGD7.9m. This will be funded by 50% cash and shares, at an issuance price of SGD0.62/share. The deal valuation is 7.9x P/E, based on FY16 earnings of SGD1m. SMG is also expanding organically. It will recruit four new specialists by 1Q18: 1) a paediatrician; 2) a senior O&G specialist; and 3) two cardiologists. SMG’s two-pronged growth strategy of inorganic and organic could ensure better long-term sustainable earnings. We raised FY18/19E EPS by 0/2% for earnings contribution from the acquisition, offset by operating costs from the recruitment of four new specialists. We see a minor dilution of 1.4%. Maintain BUY and TP of SGD0.78, based on 27x FY18E EPS (average of 2-year forward mean of small-cap healthcare peers in Singapore).
DBS Group Holdings (DBS SP)
3Q17 Results Preview: Higher Specific Provisions Offset By Consolidation Of Acquisitions
Consolidation of ANZ’s wealth management and retail banking businesses in Singapore and Hong Kong would boost loan growth to 7.1% yoy and fee income growth to 6.7% yoy in 3Q17. Unfortunately, 3Q17 net profit is expected to decline 2.1% yoy and 7.3% qoq due to higher specific provisions of S$299m. Downsizing of the Fed’s balance sheet and more interest rate hikes in the US are positive for DBS due to its strong deposit franchise. Maintain BUY. Target price: S$24.48.
Keppel Corporation: Forms Keppel Urban Solutions
Keppel Corporation (KEP) registered a 10.8% YoY rise in revenue to S$1.6b and a 30.0% increase in PATMI to S$291.8m in 3Q17, boosted by S$128m gain on disposal of subsidiaries. Stripping that out, 9M core earnings accounted for 73% of our full year estimate, in line with expectations. Property was the top contributor to the group’s earnings at 68%, followed by Investments at 18% and Infrastructure at 14%. Under Property, the group is looking at the possibility of redeveloping Keppel Towers; the Serangoon North project is also expected to be launched in mid-2018.
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