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CapitaLand (CAPL SP)

Growing Bigger And Stronger; Maintain BUY


 Reiterate BUY with new SGD4.20 TP from SGD4.00, 14% upside plus c.4% yield. 3Q/9M19 results were broadly met. Post-merger, CapitaLand – our sector Top Pick – now has a well-balanced portfolio across asset classes and geographies making it a defensive play. The key appeal is the growing recurring income base, especially from its fund management business and asset recycling strategy, which should drive ROE. Valuation is attractive at 0.8x P/BV. Our TP is based on 20% discount to its RNAV of SGD5.26/share.


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StarHub (STH SP)

On course; BUY


Profit pressure priced in; Offers compelling value

StarHub’s 9M19 core profit is tracking MKE and consensus estimates. We maintain our forecasts and DCF-based TP of SGD2.00 (WACC 5.7%, LTG - 1%). Our BUY is premised on the stock already pricing in earnings pressure at our base case scenario and that the cashflows generated by the business offer deep value at current share price levels. Any signs of industry repair would be the key catalyst to a re-rating. Irrational competition in its various revenue segments is the key risk to the outlook for the sector.


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Heightened credit costs on weaker macro


■ 3Q19 results were characterised by heftier S$323m provisions and -2bp NIM qoq. Sustained wealth income and lower CTI. IFRS9 costs were the culprit.

■ Management guides for low-single-digit loan growth in FY20, slightly lower NIMs and 20-25bp credit costs. We cut NIM estimates 1-5bp in FY19-21F.

■ Maintain Hold with lower TP of S$11.94 as we roll forward to CY20. M&A plans remain an overhang on OCBC as CET-1 holds strong at 14.4%.


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Koufu Group (KOUFU SP)

3Q19: Results In Line; Robust Outlook


3Q19 core net profit growth of 19% yoy was in line with expectations, with 9M19 core net profit meeting 72.6% of our full-year forecast. Earnings was lifted by new outlets, growth in existing outlets as well as margin expansion. Outlook remains robust with two new food courts due to open in 2020 and a higher target of 29 bubble tea outlets by end-19. Maintain BUY and target price of S$0.95. Koufu is undervalued at 13.6x 2020F PE, vs peers’ average of 18.7x 2020F PE.


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