ANALYSTS SAY: Buy, Sell, Hold (23 Mar '18)

ST Engineering (STE SP)

Expects To Grow At 2-3x Global GDP Growth; Upgrade To BUY

STE guided for smart city and marine revenue to double over the next five years. Excluding the former, the rest of the businesses are expected to grow 2-3x faster than global GDP growth over the next five years. We believe that STE’s optimism is due to recent contract wins and global expansion plans. If such overseas contract wins materialise, then STE could morph into a growth stock. Upgrade to BUY with a target price of S$4.10.

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Valuetronics (VALUE SP)

New Tech Illuminating The Way

On the cusp of secular lift-off; initiate with BUY

VALUE is a beneficiary of emerging demand for home IOT and car connectivity through its smart-lighting customer and Aptiv. Both customers are domain leaders and should enjoy outsized growth in their markets, which are on the cusp of a takeoff. Relationships with these customers are also sticky, thanks to strong execution. These underpin our above-consensus EPS forecasts for FY18-20E. Strong cash flow should pave the way for 4.7-6.1% dividend yields. Our ROE-g/COE-g-based TP is SGD1.25 (2.8x FY19E P/BV, average adjusted ROE of 24.6%, LTG 2%).

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OUE Commercial REIT

Revitalising One Raffles Place

■ Planning AEI at ORP, bringing in a co-working tenant

■ AEI likely to improve shopper circulation

■ We do not expect significant frictional vacancy during the AEI period, exercise to be funded by internal resources

■ Maintain Hold and TP of S$.0.75

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Viva Industrial Trust: Viva La Viva!

Since the start of the market rout at the beginning of Feb till the 22 Mar close, Viva Industrial Trust (VIT) has clocked a total return of -7.4%, underperforming the FTSE Straits Times REIT Index by 3.7 ppt. We believe that the underperformance has to do with investor uncertainty in anticipation of further news on the proposed merger with ESR-REIT. Should an agreement on the merger be reached, we believe that the share swap ratio will likely be at least dividend-neutral in order to entice the VIT unitholders to accept the offer. Given that VIT is trading at 8.6% FY18F yield and 7.9% FY19F yield as of 22 Mar’s close, we see this as a fairly attractive entry price. On the other hand, should the relevant parties fail to reach an agreement, we expect the uncertainty associated with ongoing discussions to be alleviated, which may in turn help the unit price recover to prior levels. Our forecasts and fair value of S$0.93 remain unchanged. Upgrade VIT from Hold to BUY.