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UOB KAYHIAN |
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ST Engineering 3Q19F earnings could outperform peers?
■ We believe STE could outperform its industrial peers in the upcoming 3Q19 earnings season, with 9% qoq and 12% yoy profit growth to c.S$151m. ■ We gleaned from STE’s teach-in that satcom industry demand grows by a c.10-15% CAGR p.a. We expect similar growth for STE’s satcom profit. ■ We like the satcom business which is scalable, its 70-80% market share in broadcast and aviation sectors and customers are locked in for the long-term.
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ComfortDelGro Corporation (CD SP) Bright Spots To Take Comfort
In Public transport fare hikes are a positive for SBS Transit’s rail operations, which is currently operating at a loss. The overall fare adjustment of 7% translates to a net increase of about S$17m in annual revenue for the rail operations. While the taxi fleet’s decline is a headwind, management noted some bright spots, such as a recent decrease in driver incentives for Grab. Maintain BUY with a target price of S$2.95.
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MAYBANK KIM ENG |
MAYBANK KIM ENG |
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Singapore Banks 3Q19: What to expect
Potentially stronger loan growth, but higher NPL risks UOB will be reporting 3Q19 results on 1 Nov, followed by OCBC on 5 Nov and DBS on 11 Nov. Stronger than expected system loan growth – especially in ACU – may potentially drive upside surprises for UOB and OCBC given their sizable ASEAN footprint. NIMs may likely be a mixed bag given falling SIBOR, which may have a negative impact on DBS with their larger, slow to reprice CASA funding base. Asset quality will be primary focus for us, in the tougher macro backdrop as well as the weakening trend we have observed in 1H19. Nevertheless, stronger cost management, improved fee income – especially from wealth management – should provide tailwinds for YoY earnings momentum to remain positive.
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Sheng Siong Group (SSG SP) Reiterate SELL
Mixed bag of results for supermarket and F&B sales The increase in Aug sub-index supermarket sales (+1.8%) was the strongest this year since Jan (+9.6%), which we think is partly due to switching from dining at casual eateries (-0.4%) to home-cooked meals, and a low-base effect YoY. However, F&B discretionary spend remains strong. Despite weak economic growth, we have yet to see a clear behavioural switch from ready meals to have home-cooked food and hence sustained demand for fresh produce, which would benefit supermarket operators like SSG. Accordingly, maintain SELL on SSG w/unchanged DCF-based TP of SGD0.96 (WACC: 7.8%, LTG: 1%).
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