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CGS CIMB |
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ST Engineering LEAP ahead
■ We think the acquisition of nacelle manufacturer MRAS from GE for US$630m could boost STE’s profit by c.8-12% in FY19F-FY20F, conservatively. ■ Assuming a 50/50 cash/debt funding on net consideration, STE would swing into net gearing of c.0.1x, which is reasonable, and a less lazy balance sheet. ■ The purchase price implies a 10x EBITDA for the 12-month ended Jun 2018. On a forward basis, we estimate c.12.5x FY20F P/E. ■ Maintain Add and S$3.80 TP, based on blended valuations. Acquisition is slated to complete by 1Q19, subject to approval. Our TP would rise to S$4.13 upon completion.
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Consumer Discretionary - Overall CGS-CIMB’s Consumer Day wrap-up
■ At our Consumer Day held on 11 Sep, we hosted 11 companies (seven we cover, four non-rated) within the consumer staples, e-commerce and media/tech space. ■ The event was attended by 101 buy-side analysts and fund managers. ■ Consumer staples names (Sheng Siong and Thai Beverage) received the most investor attention; e-commerce names also piqued investor interest. ■ Within the media and tech stocks, we hosted mm2, Silverlake and Spackman. ■ Overall, investors were positive on domestic supermarket plays and interested in learning about the key value propositions of the e-commerce companies.
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| UOB KAYHIAN | OCBC |
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MID CAP STRATEGY – SINGAPORE Safety First Given the external uncertainties, we would adopt a defensive stance, and within the small/mid caps, visible earnings and sustainable dividend yields are preferred. Our key picks include CSE, Valuetronics and PropNex.
WHAT’S NEW Risk aversion leading to sharp decline in small caps. On a ytd basis, the small-cap sector, represented by FTSE ST Small Cap Index declined 13.4% and underperformed the FSSTI’s ytd decline of 8.0%. This is not surprising given the general risk aversion in view of the external concerns over rising trade tensions, uncertainties over the US midterm elections as well as higher interest rates. Following this, small and mid-cap stocks, particularly illiquid stocks, have borne the brunt of the selldown. This report highlights our key picks in the mid-cap space in view of these developments.
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Singapore Residential Sector: Life’s not a bed of roses
Although valuations for the benchmark index for Singapore developers are undemanding, given that the blended forward P/B ratio currently stands at 0.55x, or 1.6 standard deviations below its 10-year average of 0.78x, we believe investor sentiment towards the sector remains muted, while there is also a lack of near-term catalysts. We have seen some pricing pressures on projects which were launched on or shortly before 5 Jul, as ASPs have declined by 0.4% to 6.2% (data from 6 Jul to 2 Sep) as compared to 1 Jun to 5 Jul ASP levels. As such, we maintain NEUTRAL on SG developers. We narrow our private residential price growth forecast to 8%-10% for 2018 (previously 8%-12%; 1H18: +7.4%), and also trim our private transaction volumes projection to 8k-10k units from 10k-12k units. Our preferred sector picks are CapitaLand (CAPL SP) [BUY; FV: S$4.09] and UOL [BUY; FV: S$8.48]. We expect developers to focus more on growing their recurring income streams amid residential headwinds and to seek overseas opportunities, while being more prudent in their land replenishment in Singapore. |
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DBS VICKERS |
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Singapore Office
HSBC to move into MBFC Tower 2 • HSBC signs long lease at MBFC Tower 2 from 2020 • Approximately 140,000 sqft of space to be taken at the top floors of MBFC Tower 2 • Lease highlights again the quality of buildings owned by Keppel REIT and Suntec REIT • Maintain BUY on Keppel REIT (TP: S$1.41) and Suntec REIT (TP: S$2.30)
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Check out our compilation of Target Prices