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UOB KAYHIAN |
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Keppel Corp (KEP SP) A BUY Even After Crude Oil Price Collapse
Maintain BUY, with a new SGD7.60 TP from SGD7.80, offering 35% upside plus c.4% FY20 yield. The recent OPEC+ meeting ended with no agreement, and Brent crude sank to USD36.00/bbl, vs the past 12 months’ average of USD63.00/bbl. If sustained at a low price, this could adversely affect Keppel’s offshore and marine (O&M) forward orderbook. However, Dec 2019 net O&M orderbook of SGD4.4bn (higher than Dec 2018’s SGD4.3bn) is a plus. In the meantime, its property division’s earnings should support dividends.
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Banking – Singapore Exposure To O&G Sector – Tried, Tested And Whittled Down
Banks have whittled down their exposures to the O&G sector through recoveries and write-offs. The remaining exposures have weathered volatilities in crude oil prices over the past five years. Additional provisions are limited by significant mark down in valuation of collaterals. Banks’ dividend yields have surged to about 6% after the recent steep correction. OCBC is trading below BVPS with 2020F P/B at an attractive 0.90x. Maintain OVERWEIGHT. Re-iterate BUY for DBS and OCBC.
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| CGS CIMB | DBS VICKERS |
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Valuetronics Holdings Ltd Hold for 7.5% yield, strong net cash
■ We cut our FY20-22F EPS by 4.1-13.1% to account for Covid-19 disruptions, mixed customer outlook, and possible macro slowdown. Reiterate Hold. ■ Cashflow generative, strong net cash of S$0.42/share, and 7.5% dividend yield are key positive attributes, and could limit downside for the stock. ■ Improved order visibility and customer gains could re-rate the stock. We would bargain hunt close to 1 s.d. below historical mean (6.2x forward P/E).
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Singapore Retail REITs Retail Sector – Riding out the storm with tenants
• Tenant support measures offered by landlords during COVID-19 outbreak may soften near-term earnings outlook but will result in stickier tenant-landlord relationships in the future • Portfolio occupancies across REITs have improved since 2018 and projected to stay sticky given active management • Rental reversionary trends to soften in 1H20; but past acquisition activities should maintain uptrend in distributions in 2020. Acquisitions to feature strongly this year. • Prefer suburban landlords (CMT/ FCT) while expecting rebound in sales at VivoCity (MCT) may drive operational performance. • Estimated worst case scenario of c.-3 to -5% impact in distributions (up to c.-7.5% for China focused REITs) unlikely to materialise if impact of Covid-19 outbreak is not prolonged.
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