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

OCBC

Singapore Telcos

Our survey says: incumbents still have edge

High retention limits churn risks

Results of our recent 150-respondent survey of subscriber decisions and preferences suggest that incumbent telcos continue to have an edge in subscriber retention, amid the proliferation of new MVNOs and a new MNO. Some 81% of our respondents had stuck to their providers for more than 24 months (Fig 1). This supports our NEUTRAL view on the sector as churn and potential 100% loss-of-revenue risks from such appear limited. The sector, however, lacks immediate catalysts. NetLink NBN Trust remains our top pick, given its virtual monopoly of residential fibre connections.

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SG Hospitality: Jostling into the New Year!

Since CDL Hospitality Trusts (CDLHT), Ascott Residence Trust (ART), and OUE Hospitality Trust (OUEHT) posted their FY18 results on 29 Jan till 4 Feb’s close, the REITs have posted total returns of +5.7%, +2.6%, and +6.5% respectively. Far East Hospitality Trust (FEHT) which has yet to report its earnings, has also posted total returns of +4.0% over the same period. This compares to total returns of -0.3% from the Straits Times Index, and +0.0% from the FTSE Straits Times REIT Index. We highlight three catalysts for the strength of the rally: 1) favorable operational outlooks by the three REITs on RevPAR growth (especially local), 2) expectations of a pause in the Fed rate hike, 3) recent hospitality transactions conducted at rich valuations vs. valuations of comparable assets on balance sheets. But is there still room to participate after the rally? We believe there is. Out of the stocks under our coverage, we continue to have a clear preference for OUE Hospitality Trust [BUY; FV: S$0.82]. Beyond a positive operational outlook, the REIT currently trades at a 7.1% FY19F dividend yield, which is 70 bps and 150 bps over FEHT’s and CDLHT’s respectively. We also have BUYs on Far East Hospitality Trust (FEHT) [BUY; FV: S$0.675], and Ascott Residence Trust (ART) [BUY; FV: S$1.25]. Maintain OVERWEIGHT on Singapore Hospitality.

DBS Group Holdings (DBS SP)

4Q18 Results Preview: To Deliver Good Results Despite Headwinds

We forecast net profit of S$1,289m for 4Q18, down 8.8% qoq but up 8.0% yoy. We expect double-digit growth in net interest income of 10.1% yoy, which offsets the decline in contributions from wealth management fees (-3.1% yoy) and net trading income (-47.4% yoy). DBS provides an attractive dividend yield of 5.0% based on a DPS of S$1.20 for 2019. Maintain BUY with an unchanged target price at S$28.50.

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