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MAYBANK KIM ENG |
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Hongkong Land Holdings (HKL SP) Shining Gems Amid Hong Kong Turmoil
HKL is trading at an attractive 0.36x P/B, unrepresentative of its underlying asset quality. HKL has a US$38.7b investment portfolio (c.88% of its gross assets), concentrated in the CBDs of Hong Kong (83%) and Singapore (10%). Hong Kong developers have room to increase leverage further, to boost ROEs (and close P/B gaps vs Singapore peers). Share price catalysts include easing of the Hong Kong political stalemate, share buybacks and deployment of US$15.4b debt headroom into mainland China.
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Singapore Banks Artificial relationships
What matters most for NPLs is not what you think For banking cycles after the GFC, we have trained MKE’s proprietary machine learning algorithms to identify the key variables that affect Singapore banks’ NPLs. From our analysis, it appears that the pace of non-SGD loan growth, domestic inflation and the rate of change in special-mention loans have the strongest influence in setting the direction of NPLs. In contrast, interest rates, changes to unemployment and GDP growth – variables that traditionally guide NPL forecasts – seem to have a lesser impact. With overseas lending accounting for a large share of loan growth in the past three years, we think NPL risks may heighten as the cycle turns. That said, strong capital and good dividend visibility should provide buffers. Remain Positive on Singapore banks, with UOB top pick
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RHB |
LIM & TAN SECURITIES |
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Real Estate Measures To Boost Public Housing Market
Stay NEUTRAL; prefer diversified plays and real estate agencies. The Government’s latest announcement to support first-time HDB buyers should prop up HDB resale market volumes and stabilise prices which have been trending south. While the move is slightly negative for the private property market, we note the renewed buying interest in recent new launches – which we believe is driven by GSW and the URA draft master plan 2019 announcements, and persistently low interest rates.
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Sunpower Group ($0.475, up 2 cents) announced that it has bagged manufacturing and services contracts worth an aggregate of RMB55.7mln from reputable repeat customer, SINOPEC Group. Under the contracts, Sunpower will provide high-end environment protection products and services to SINOPEC, with delivery anticipated to be completed by 2020. This is expected to have a positive impact on the Group’s FY2019 and FY2020 results. At $0.475, market cap is $367.2mln, trailing P/E is 6.9x, P/B is 1.2x, dividend yield is 0.4%, dividend payout ratio is 1.6% and net-debt-to-equity is 65%. |
Check out our compilation of Target Prices