ANALYSTS SAY: Buy, Sell, Hold (8 Mar '18)

Singapore Exchange Ltd (SGX SP)

NDR Highlights: More Opportunities Ahead

Positive on growth strategies

During our recent NDR with SGX in Malaysia, investors were interested in: 1) growth strategies and opportunities; and 2) the latest developments on the BM-SGX trading link and SGX India equity derivatives. We believe SGX is a good proxy for the market cycle, with healthy FY18-19E ROEs of ~35% and yields of ~4%. Maintain BUY and TP SGD8.73, based on an unchanged P/E of 23x FY19 EPS, in line with its mean since 2012.

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China Jinjiang

More conservative dividend payout going forward

■ China Jinjiang’s (CJE) FY17 net profit was 12% below our forecast.

■ We expect operating capacity to drop 9.5% in FY18F due to plant closures and divestments but should grow at 28% p.a. in FY19F and FY20F.

■ We think dividend payout will be cut to 30% in FY18F-20F due to capex needs.

■ FY18F-19F EPS cut by 14%-18% and DCF-based TP cut to HK$0.85/share.

■ Attractive valuation with FY18F P/E of 5.2x and dividend yield of 5.7%. Maintain ADD

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Oversea-Chinese Banking Corporation (OCBC SP)

Unlocking Value Through IPO/Trade Sale For GELM

We expect OCBC to recognise divestment gain of S$608m for vendor sale of its 30% stake in GELM during the impending IPO in 4Q18. We expect OCBC to hike final dividend for 2018 to 22 S cents based on payout ratio of 45%. We expect any special dividend to be modest in size given the need to retain and re-invest to support future growth. We estimate fully-loaded CET-1 CAR post-IPO of GELM at 12.9%, which would be in line with its peers’. Re-iterate BUY with higher target price of S$14.95.

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Soft commodities: Diversity is a virtue

During the latest FY17 results, Wilmar International (WIL) reported earnings (US$1.2b) that was better than expected, while the earnings of Golden Agri-Resources (GAR) [HOLD; FV: S$0.37] was impacted by impairment losses and another one-off items. Looking ahead, CPO prices are likely to remain lacklustre. India also recently raised import taxes on crude and refined palm oil, which is likely to dent imports. India mainly imports palm oil from Indonesia and Malaysia, the world’s top producers. It is expected that the duty hike would narrow the difference between palm oil and soft oils like soy oil and sunflower oil, which is likely to lead to increased demand for the latter two. Pure CPO upstream players are likely to be more impacted by this development in India, whereas more diversified players like WIL, which also trades in other oils are likely to be less impacted. Meanwhile, WIL [BUY; FV: S$3.51] remains our preferred pick in the sector. HPRY Holdings, a company wholly-owned by Mr. Kuok Khoon Hong, has also been acquiring shares in WIL recently – a total of ~3.3m shares at an average of S$3.107/share since late Feb.

CIMB SECURITIES

CSE Global

Meeting halfway; DPS of 2.75 Scts guided

■ CSE announced it had met with shareholder Quarz Capital recently and guided a DPS of 2.75Scts for CY18, slightly higher than our forecast of 2.5 Scts.

■ While we are heartened by the commitment to reward shareholders, we still believe margin expansion and new greenfield orders are integral to net profit growth ahead.

■ Maintain Hold and TP of S$0.39 per share based on 12x CY19F EPS.

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