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

Land Transport Sector

Improving operating landscape from regulatory reviews and changes

 Areas under review are: fare formula and licencing of private-hire car companies

 Operating regime change: NEL and SPLRT move to NRFF on Apr 1

 Regulatory reviews and changes addressing profitability and sustainability

 Fare formula under review by the PTC: any revenue impact is limited to Rail business

 Private-hire car companies possibly facing a licencing regime

 Rental car population YoY growth has moderated, and population has contracted YTD

 Uncertainty of takeover of Uber by Grab for Southeast Asia remains

 Maintain Overweight on the Land Transport Sector, and "Buy" rating on ComfortDelGro Corp with a target price of $2.50.

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Dyna-Mac Holdings Ltd

Safe small-cap proxy for coming FPSO upswing

■ Dyna-Mac Holdings (DMHL) fabricates/assembles topside modules for floating production solutions and specialised structures for subsea projects.

■ External consultants and industry players forecast that at least 7-11 floating solution contracts may be awarded p.a. in CY18-21F, as crude oil prices have recovered.

■ DMHL has 17+ years of delivering topside modules and has forged relationships with customers since 2000 giving it credence in the upcoming contracting cycle.

■ Contracts worth S$90m have already secured for CY18F and DMHL is now in a net cash per share position (23.2% of share price). We expect narrower losses in CY18F.

■ Initiate with Add and S$0.18 TP, based on 1.8x CY18F P/BV.

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Oversea-Chinese Banking Corporation (OCBC SP)

Intelligent Banking Services

We are encouraged to see OCBC embarking on many IT initiatives to improve operating efficiency. It has set up an in-house unit with an initial investment of S$10m to develop AI capabilities for wealth advisory and loan financing. The impending IPO or trade sale of its 30% stake in GELM in 4Q18 to comply with limits on foreign ownership is another catalyst. Re-iterate BUY and target price of S$14.95.

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Sembcorp Industries: Electricity retail a small part of portfolio

With further liberalisation of Singapore’s retail electricity market, there have been questions on the impact on utilities players such as Sembcorp Industries (SCI). First, we note that SCI’s Singapore energy business is broken down into three business lines: 1) Gas & Power, 2) Merchant & Retail, 3) Renewables & Environment, and we had earlier estimated that retail electricity sales does not constitute a large part of the Singapore energy business. Indeed, further digging revealed that Sembcorp Power Pte Ltd reported net profit of S$3.4m to S$4.4m per year between 2014 to 2016. This is marginal compared to the group’s total net profit. Though there is the possibility of irrational competition in the initial phase of market liberalization which could pressure margins, we note that the Singapore electricity retail business is just a segment of the group’s diverse portfolio that spans sectors and geographies. Meanwhile, we look forward to the growth of the LNG power business for SCI. The group has a global scalable operating model, and is well-positioned to implement its new strategy to achieve double-digit ROE in five years. Our FV remains unchanged at S$3.59; maintain BUY.