| MAYBANK KIM ENG |
OCBC SECURITIES |
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City Developments (CIT SP) Deferring Launch Plans Limited downside; maintain HOLD
1H18 EPS is in line, at 44% of our FY18E estimate. Nonetheless, we trim FY18E EPS by 5% to adjust for its deferred launch plans, while keeping FY19-20E numbers. Consequently, our RNAV dips to SGD13.88 from SGD13.91. Our TP stays at SGD10.40, a 25% discount to RNAV. With the stock trading close to -1SD of its 10-year average RNAV discount, we believe the market has priced in potential residential-market weakness. Maintain HOLD. Prefer UOL and CapitaLand for sector exposure.
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Singtel: Singing away the blues
Singtel’s 1QFY19 results came in slightly under expectations. Operating revenue dipped 0.5% YoY to S$4.1b, but was up 2% YoY in constant currency terms. The group’s EBITDA fell 2.7% YoY (stable in constant currency terms) to S$1.2b, which formed 23.9% of our full-year forecast. Underlying profit fell 19.3% YoY to S$733.5m, on the back of softer results from Airtel and Telkomsel, reduced economic interest in NetLink NBN Trust, an increase in withholding taxes and adverse currency movements. Management struck a cautiously optimistic tone on the prospects for Telkomsel and Airtel. In Indonesia, the group has noted some price stabilization post Lebaran, while the worst should be behind Airtel. In its home market, Singtel expects that TPG’s initial target segment would be the SIM-only customers, which currently constitutes a small proportion of Singtel’s total customer base. Notwithstanding that, Singtel’s geographically diversified exposure would also render its collective earnings more resilient in the face of TPG’s entry, as compared to some of its other peers. With a change of covering analyst, we revise our fair value slightly from S$4.10 to S$4.08. Maintain BUY. |
| CGS CIMB | UOB KAYHIAN |
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Sunningdale Tech Ltd Watching gross margin trend
■ At 39% of our full-year forecast, we deem Sunningdale’s 1H18 net profit in line assuming 2H seasonality and US dollar strength holds. ■ A higher interim DPS of 3.0 Scts was declared (1H17: 2.5 Scts). ■ Key one-off items in 2Q18 results were S$3.8m FX gain and S$1.0m start-up loss at its new Penang plant. ■ We are concerned over the gross margin trend and have cut our FY18-20F gross margin assumptions. We subsequently cut our FY18-20 EPS forecasts and TP. ■ Maintain Add. Our target price of S$2.05 (previously S$2.50) is based on 1.02x FY18 P/BV (previously 1.23x FY18 P/BV), as ROEs decline.
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CapitaLand (CAPL SP) 2Q18: Looking Good On Hindsight
Management sees Singapore residential slowing in 1H18 amid cooling measures. Due to its limited Singapore residential exposure, the group continues to be wellpositioned to seek local and overseas expansion (and on track to grow its AUM to S$100b by 2020). Amid cooling measures restricting price growth in China, the group has delayed some of its launches. Management also seeks to expand further in Vietnam (up to 10% capital allocation). Maintain BUY with a lower target price of S$3.78.
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DBS VICKERS |
DBS VICKERS |
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Yangzijiang Shipbuilding
Raising the bar Reiterate BUY; TP unchanged at S$1.82. Yangzijiang is a steal, trading near net cash (including HTM investments) of 91 Scts, undervalued at 0.7x P/BV, a c.20% discount to global peers, notwithstanding its more attractive 10% ROE and 5% yield. The astounding 2Q profit soaring 67% q-o-q serves as a confidence booster on Yangzijiang's shipbuilding profitability. It is a prime beneficiary of stronger USD and among the best proxies for shipping and shipbuilding recovery.
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PACC Offshore Services Holdings Good news on the SSAV front Revenue visibility improves with SSAV contracts but maintain HOLD on overhang from MBC’s proposed bulk sale.
We think the proposed bulk sale by major shareholder Malaysia Bulk Carriers Berhad (MBC) will remain a technical overhang on the stock in FY18 (see below). Meanwhile, 2Q18 saw continued strong performance from the Accommodation segment, and the two heavyweight Semisubmersible Accommodation Vessel (SSAV) assets have seen charter extensions into 3Q18. The first SSAV has also secured a new 8+8-month contract with Petrobras in Brazil from end-2018, thus boosting revenue visibility. OSV segment utilisation continues to improve as well, but though overall gross profit margin for POSH improved to 17% in 2Q18, it is not enough to effect a turnaround at the net profit level yet. In terms of balance sheet, POSH’s net gearing is now at c.1.66x owing to impairments taken, but the company’s positive OCF, lack of bonds outstanding, lack of capex and undrawn bank facilities of c.US$119m give us comfort.
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