ANALYSTS SAY: Buy, Sell, Hold (3 Apr '18)

Sheng Siong Group (SSG SP)

At the Heartland of the Matter

Not just resilient, winning market share; BUY

Excessive concerns about e-commerce disruptions led to SSG’s 12-month underperformance of 10% against the STI, despite its results resilience. SSG continues to offer grocery-shopping convenience, focusing on fresh foods in densely-populated HDB estates, where more than 80% of Singapore’s residents reside. We resume coverage with a BUY rating, expecting catalysts from: 1) further improvements in consumer spending; 2) SSG’s further market-share wins from convenience stores and traditional market grocers; 3) a potential surge in new stores in 2018; and 4) continued good sets of results, supporting high ROEs and dividends. Our DCF TP is SGD1.20 (7.7% WACC, 1.5% LTG). Key risks include landlords taking back their rental space and fiercer-than-expected competition.

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Keppel Corporation

Divestment gain to boost 1Q18 earnings

■ Keppel Land China will recognise c.S$270m of gain from divestment of 100% stake in Keppel China Marina Holdings after clearing the objections by a minority shareholder.

■ We expect 1Q18 (on 19 April 2017) earnings to be supported by the gain. O&M may reach almost breakeven without kitchen-sinking provisions.

■ Add maintained with an unchanged SOP-based TP of S$10.00.

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Singapore Residential Sector: Momentum garnering strength

Based on URA's flash estimates released yesterday, Singapore's private residential property price index grew 3.1% QoQ in 1Q18 (transactions up till mid-Mar). This was the third consecutive quarter of sequential growth and also represents the highest QoQ increase since 2Q10 (+5.3%). We deem this as a strong set of numbers as we were previously projecting residential prices to grow 3% - 8% this year. We now expect the full-year growth figure to come in at the upper-end of our forecast or even potentially exceeding it. As a breakdown, prices of non-landed private residential properties jumped 5.0% QoQ in Core Central Region (CCR); prices in Outside Central Region (OCR) rose 3.8% while prices in the Rest of Central Region (RCR) increased by 1.1%. We view sector valuations as compelling and maintain OVERWEIGHT on the Singapore residential sector. Our top picks are City Developments Limited [BUY, FV: S$15.91], UOL Group Limited [BUY, FV: S$10.63] and CapitaLand Limited [BUY, FV: S$4.26].

Monthly Strategy

Sit tight - Directional break ahead

 STI to break out from 3400-3500 tightening consolidation in 1-2 months

 Hedging against inflation – Gold, oil, commodities and farmland, real estate

 US-China trade war on the horizon

 Stocks to position ahead of upcoming ex-dividend dates – UOB, ST Engineering, Chip Eng Seng, First Resources, Hong Leong Finance, Sunningdale

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