ANALYSTS SAY: Buy, Sell, Hold (5 Feb '18)

Singapore Post Ltd

3QFY18: recovery in transit

■ 9MFY3/18 core net profit fell 4.8% yoy but met our and Bloomberg consensus expectations, at 73% of our full-year forecast.

■ Upgrade from Hold to Add with higher TP of S$1.58. We think it is poised for earnings growth in all three segments, plus rental income from newly-opened retail mall.

■ Strengthening Alibaba collaboration, and recent launch of international airmail rates could help ease concerns from terminal due changes.

■ Continual ramp-up of RCLH, and initiatives to make QSI HK more competitive, could pave the way for logistics’ bottom-line recovery.

■ Ecommerce turnaround on track after passing 3Q’s litmus test with stable losses.

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SIA Engineering (SIE SP)

3QFY18: Exceeds Expectations On Higher JV & Associate Income

Headline net profit and core net profit rose 4.2% yoy and 8.9% yoy respectively on higher JV & assoc income. The declines in staff and subcontract costs are positive surprises. Consequently, we raise our FY18-19 net profit forecasts by 9.4% and 4.7%. At our target price, the stock would trade at ex-cash PE of 22.6x and 20.2x FY18-19 core earnings respectively. Maintain BUY and target price of S$4.00.

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Sembcorp Industries: Warrants a spot in your portfolio

 Utilities and other assets undervalued
 Few peers with its track record
 Await strategic review

Riding on the marine wave; talk about Indian IPO
With growing optimism in the oil and gas industry, January has been a great month for stocks in the sector. YTD, Sembcorp Industries (SCI) is up 18%, while Sembcorp Marine (SMM) is up 50%. Keppel Corporation has also benefitted with a 20% rise in its share price. On 18 Jan 2018, there were also media reports that SCI is gearing up for an IPO of its Indian arm which could see it raise around US$500-600m. On 19 Jan, SCI announced that it “continually evaluates various commercial and financial options for its businesses, and that at present there are no developments warranting an announcement”.

Undervalued utilities and other assets
At current levels, SMM’s market cap is about S$5.8b compared to SCI’s S$6.4b. Excluding SCI’s 61% stake in SMM, this would leave S$2.9b in terms of “market accorded” value to SCI’s utilities, urban development and other assets, or about 0.6-0.7x book which seems low in our view. Possible reasons weighing on SCI could be 1) uncertainty over the results of the strategic review, 2) concern over price paid for SMM should there be a privatisation. Still, on a valuation basis, SCI’s ex-Marine assets look undervalued after the recent rally in SMM’s share price.

Few with its track record
As a leading developer, owner and operator of energy and water assets with strong operational, management and technical capabilities, Sembcorp Industries has grown its operations to 14 countries and looks set to cement its presence in Asia. There are few companies that can match the group’s established track record in developing greenfield assets and it is unlike the typical utilities company which some view as yield plays. Meanwhile, the market is likely to continue to focus on the results of the strategic review, as 2018 could see a different SCI, as per our earlier report. We update various entities in our sum-of-parts valuation, including our fair value estimate for SMM, leading to a higher fair value estimate of S$3.95.

Ascendas Hospitality Trust

Still offers upside

Tighter yields ahead. We maintain our BUY call with a revised TP of S$0.97. While we expect Ascendas Hospitality Trust’s (ASCHT) DPU to take a breather in FY18 and its yield differential to other hospitality REITs has now compressed to its average differential spread of 0.6% as we had projected in 2017, we believe the sale of its Beijing hotels at more than twice the book value demonstrates the valuation upside potential of its portfolio. This we believe should allow ASCHT’s yield differential to tighten further from here.

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RHB SECURITIES

Loan Growth Accelerated On Financial Sector Demand

Singapore’s M3, including Asian currency units, increased 4.1% YoY in December, slowing down from a 4.3% rise the month before. The moderation in growth was broad-based with public and private demand for credit as well as net foreign position all easing from the month before.

Going forward, we maintain our expectations for M3 to accelerate to +6.2% in 2018. This is premised on a strong SGD, rising economic prospects, and a pick-up in property transactions.

Bank lending picked up to +8% YoY, driven by increased corporate loan demand.

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