ANALYSTS SAY: Buy, Sell, Hold (7 Jan '19)

UOB KAYHIAN

SPH REIT

Good turnaround from Paragon

■ 1QFY8/19 results were in line, with DPU forming 23.3% of our FY19 forecast.

■ Improvement in rental reversion as well as contribution from the Rail Mall and Figtree are expected to be the main growth drivers in FY19-20.

■ The share lacks major catalysts. Maintain Hold with a target price of S$1.02

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SIA Engineering (SIE SP)

Potential Earnings Surprise From Increased Engine Checks

SIAEC was a key underperformer in 2018 amid concerns over a deteriorating top-line. While challenges remain, SIAEC is addressing this by growing its line maintenance business. However, a more immediate stock price catalyst could come in the form of strong JV & associate income, particularly related to engine checks on the Rolls Royce Trent 1000, which should boost 3QFY19’s earnings and beyond. We raise our FY19-20 net profit estimates by 10% and 19%. Upgrade to BUY with a target price of S$2.70.

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Venture Corporation (VMS SP)

The Shipments Are Strong With This One; Upgrade To HOLD

Shipment data suggests a strong 4Q18, as guided by management during their 3Q18 results. While unsurprising, given that 4Q has traditionally been VMS’ strongest quarter, we suspect it had the added benefit from order front-loading as a result of the 90-day trade war ceasefire. Order front-loading may bode ill for 2019 production. Negatives have been largely priced in and we upgrade to HOLD. Target price remains unchanged at S$12.90, pegged to 11x 2019F PE. Entry price is: S$12.40.

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SPH REIT (SPHREIT SP)

A Decent 1Q19, but Still Awaiting Acquisition News

In line, maintaining forecasts and TP

1Q19 results were in line with consensus and our estimates, with revenue and NPI +0.6% YoY/-1.9% YoY, and DPU of SGD1.34cts at 24% of our fullyear. Tourism shopping receipts fell 15.0% YoY in 6M18 against 7.7% YoY growth in arrivals; we see larger destination malls (VivoCity) continuing to perform better. However, we expect a recovery in prime Orchard Road rents due to tight supply to support further positive rental reversions at Paragon. With its first overseas deal in the bag, valuations have started to price in further inorganic growth opportunities. Investors however will need patience, given the limited visibility of its long-discussed potential Seletar Mall deal. Reiterate HOLD with unchanged DDM-based TP of SGD1.02 (WACC 6.9%, LTG 1.5%). We prefer FCT (BUY, TP SGD2.55) for its suburban-mall footprint and prospective 4.5% 3-year DPU CAGR.

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