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OCBC |
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Oversea-Chinese Banking Corporation (OCBC SP) 2Q19 Results Preview: High Single-digit Growth In Net Interest Income
We forecast net profit of S$1,147m for 2Q19, marking a slight easing of 5% yoy and 7% qoq. The sequential reduction in earnings is likely to have been due to moderation in non-II, such as insurance and net trading income. We have toned down our expectations for interim dividend from 25 S cents to 24 S cents as the deterioration in external outlook could prompt management towards a more conservative payout ratio. OCBC will also deploy capital to invest in the GBA. Maintain BUY. Target price: S$14.62.
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Frasers Commercial Trust: A good run thus far Frasers Commercial Trust’s (FCOT) 3QFY19 scorecard was broadly within our expectations. DPU for 3QFY19 was flat YoY at 2.4 S-cents, representing 25.0% of our full-year forecast. We estimate that FCOT still has ~S$153m available for capital top-ups, including the gains from the disposal of 55 Market Street. Since our upgrade in Apr’18, FCOT has achieved a total return of 25.7%, outpacing the FTSE Straits Times Real Estate Investment Trust Index by 4.2%pts over the same period. While the ~344,100 sqft taken up by Google at ATP has helped to boost the asset’s committed occupancy to 93.7% (as of 30 June 19), we believe this has already been well digested by the market. We lower our risk-free rate assumption from 2.3% to 2.0%, given the more dovish interest rate outlook. With a slight drop in our cost of equity assumption, our fair value estimate rises slightly from S$1.69 to S$1.70. Downgrade from Buy to HOLD. |
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RHB |
DBS VICKERS |
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Singtel (ST SP) Lock In Some Gains Now; Stay NEUTRAL
NEUTRAL, SOP-based TP of SGD3.40 from SGD3.35, 3% downside. FY20 (Mar) EV/EBITDA has retraced to its 5-year mean following the recent share price re-rating, spurred by investors seeking refuge from external macroeconomic risks. At 5% prospective dividend yields (committed DPS of SGD0.175 for FY19/20), valuations are fair. Singtel remains our preferred Singapore telco, with earnings diversity and balance sheet strength as key investment merits. We would recommend that investors accumulate on dips.
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Singapore Banks
Earnings likely to be supported in 2Q • Loan repricing continues into 2Q19; likely to still see marginal NIM improvement • Apr-May’19 saw strong industry loan growth numbers amid slowing economy; 2Q19 loan drawdowns likely to be on track with guidance • Overall market sentiment remains resilient, supporting wealth management income • Singapore banks due to declare interim dividends; UOB remains preferred pick
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Check out our compilation of Target Prices
