| CIMB | UOB KAYHIAN |
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China Sunsine Chemical Holdings Continued high product prices amid tight supplies
■ Competitor Yanggu Huatai forecasts over 163% yoy growth in 1Q18F net profit, citing continued high product prices amid tight supplies of rubber chemicals. ■ Yanggu Huatai revealed that customers have moved away from pursuing low prices blindly to securing steady supplies of rubber auxiliaries. ■ We expect Sunsine’s record 4Q17 net margins of c.15% likely sustained in 1Q18F
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Genting Singapore (GENS SP) Positioning For A More Exciting Period
GENS’ share price has retraced 26% from its peak to an attractive valuation of 7.6x 2018F EV/EBITDA. We expect valuations to trend up over time, supported by stable Singapore operations and as its bidding for Japan’s IR concession builds up to the RFP stage (expected in 2019). Meanwhile, we also do not discount the possibility of GENS monetising its non-gaming properties, which could serve as a minor catalyst. Upgrade to BUY with unchanged target price of S$1.30.
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| OCBC | RHB |
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Frasers Commercial Trust: Riding the cyclical coattails
While Grade A CBD Core landlords in Singapore are the immediate beneficiaries from the broader office recovery, we believe that their Grade B CBD Core peers should also enjoy some upside, albeit belatedly. CBRE is forecasting Grade B CBD Core monthly rates to rise ~7.4% and ~8.8% in 2018 and 2019, respectively. This follows from the 8 consecutive QoQ rental declines seen between 2Q15 – 1Q17. Turning to Melbourne, the CBD office market continues to demonstrate significant resilience, which should positively affect ~8.2% of Frasers Commercial Trust’s (FCOT) portfolio gross rental income, arising from lease expiries / mid-term reviews from its asset at 357 Collins Street. Separately, we believe that FCOT’s FY18F yield of 7.0% (~0.2 S.D. below the 7 year mean) is still quite a distance away from the 5.5% yield seen during the start of the last rental recovery cycle in 1H 2013. This is in comparison to its Grade A peers, which are trading at relatively more stretched valuations. Further, we also believe that our assumptions are not aggressive, given that our FY18F DPU base case of 9.92 S-cents is not much higher than our bear case scenario of 9.82 S-cents. We leave our fair value estimate of S$1.51 unchanged, but upgrade FCOT from a Hold to BUY.
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Wilmar China Imposes 25% Tariff On US Soybeans
China has retaliated against the US imposing tariffs on its exports, by imposing a 25% tariff on soybeans imported from the US. China is the world’s largest soybean importer, while Wilmar is the second-largest soybean crusher in China. If the tariff takes effect, we think the long-term impact on Wilmar would be negative-to-neutral. Currently, there is strong demand for soybean meal from the livestock industry, but there is no certainty on whether Wilmar would be able to pass on any additional cost to customers. Meanwhile, China’s vice finance minister, Mr Zhu Guangyao, has emphasised that there is room for negotiation by both parties. Right now, it is unclear when the tariffs would take effect. This could eventually be negotiated down, as this tariff risks both the livelihood of US soybean farmers and China pig farmers. It would also potentially drive up food prices for China, the world’s largest consumer of pork. We maintain our BUY call and TP of SGD3.45 (12% upside) on Wilmar, as the group may see some short-term upside with the decline in soybean future prices, following
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Check out our compilation of Target Prices
