ANALYSTS SAY: Buy, Sell, Hold (22 Feb '18)

Singapore Airlines

Higher oil prices improve SIA’s competitive position

■ With up to 47% of its fuel needs hedged, SIA may benefit if its unhedged competitors are compelled to raise ticket prices to cover the rising cost of fuel.

■ Airfreight and premium travel demand continue to be strong into early-2018F.

■ Maintain Add, with unchanged target price, based on 1x CY18F P/BV.

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Bukit Sembawang (BS SP)

Model Update

Maintain BUY and SGD8.25 TP

We update our model to incorporate the latest data points. We believe the recent increase in Buyer’s Stamp Duty will not derail the housing recovery and continue to see BS as a concentrated proxy for this. Maintain BUY and SGD8.25 TP, based on 20% discount to RNAV of SGD10.35. This under-the-radar mid-cap developer is attractively priced against the large caps, which are a consensus trade.

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Sembcorp Marine: Will it live up to expectations?

Sembcorp Marine (SMM) reported a 21.1% YoY fall in revenue to S$655.0m and a net loss of S$33.8m in 4Q17, bringing full year net profit to S$14.1m. Excluding one-off items, we estimate core net loss of about S$70m for the full year, below expectations. Despite signs of improvement with regards to global E&P capex spending, management stated that “the immediate outlook remains challenging” and it will “take some time for capex spending to translate into new orders”. In particular, competition for orders remains intense. We note that consensus estimates of forward ROE is 3.5% for FY18 and 5.0% for FY19. Yet the stock is currently trading around 2.1x P/B, and the last two times this happened were in 1) early 2015 when est forward ROE was ~20%, and 2) 1Q09 when est forward ROE was ~27%. As such, we believe the market is ascribing a premium to potential corporate action. Meanwhile, all eyes will be on the results announcement by Sembcorp Industries on Friday morning, when there is expectation that an update on the strategic review will be shared. We roll forward our valuations to blended FY18/19F book, and our fair value estimate is tweaked from S$2.37 to S$2.43. Maintain HOLD.

TalkMed Group

Better-Than-Expected 2017 Results

TalkMed’s 2017 PATMI was above expectations, coming in at SGD32.03m, and down by just 15.4% YoY despite its key doctor being suspended during the period. It was able to mitigate this by handing over his existing patients to other oncologists within the group. We believe this is also a strong testament to the capabilities of the other oncologists within the group. Dr Ang is expected to be back by 26 Mar 2018. Hence, we continue to expect a weaker 1Q18F ahead, due to the absence of Dr Ang. Maintain NEUTRAL with an unchanged DCF-derived TP of SGD0.72 (7% upside).

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UOB KAYHIAN

KSH Holdings (KSHH SP)

Banking On A Solid Landbank; Upgrade To BUY

With the recent share price drop, we believe the negatives in the construction sector are now priced in. We see some light in the tunnel ahead. While the GaoBeiDian project may perform below expectations, cheap land cost means it is still a mega profit driver for KSH over its 10-year development cycle. Following land acquisitions, KSH now has a solid landbank to ride on Singapore’s property upcycle. Upgrade to BUY and raise our SOTP target price to S$1.08. 

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