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Rowing Against The Rising Provisions Tide


 Staying NEUTRAL. The three banks’ recent 1Q20 results showed sharply high loan loss provisioning. Their management teams also guided for continued high FY20-21 credit costs on rising NPL ratios. Softer interest rates will lead to narrower NIM, and the full impact of US interest rate cuts will only be felt in subsequent quarters, as guided by management. We believe asset quality uncertainties are a major headwind. Within the sector, we prefer Oversea-Chinese Banking Corp (OCBC) the most, given its stronger capital ratio and high exposure to a recovering Greater China.


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Singapore REITs

Monthly More clarity as the dust settles



 FTSE S-REIT Index gained +1.4% MTD after rebounding from the lows seen on 23 March 2020. Strongest gains MoM were from the industrial subsector (+3.0%) and weakest performance at the hospitality subsector (-18.5%).

 Sector yield spread of 442bps over the benchmark 10-year SGS (10YSGS) yield was at the +1.4 standard deviation (SD) level.

 Remain OVERWEIGHT on SREITs sector with sub-sector preferences in Office and Industrial portfolios.


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PropNex (PROP SP)

1Q20: A Silver Lining In The COVID-19 Crisis


1Q20 results came in better than expectations, at 36% of our full-year forecast. With COVID-19, management sees sales volume contracting and financial impact from 2H20. However, preliminary data suggests PropNex is gaining market share during the circuit breaker period on new launches with virtual tours. PropNex is wellpositioned to tide the COVID storm with an enviable S$89.8m net cash (48% of its market cap). Maintain BUY with a lower S$0.65 target price (previously S$0.68).


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Singapore Semicon Equipment

Decent demand dynamics


Demand intact; supply reverting to normal AEM and UMS posted solid 1Q20 performance, and read-across is favourable. Intel (AEM’s customer) is progressing with leading edge investments, while AMAT (UMS’ customer) is seeing record orders. We raise FY20-22E EPS for UMS by 3-5% to factor in robust outlook from AMAT. Maintain BUY on UMS with higher ROE-g/COE-g TP of SGD1.00 from SGD0.96. Semiconductor and equipment industries are “critical” in many countries, reducing the odds of further Covid-19 disruption as the year progresses.


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LionelLim8.16Check out our compilation of Target Prices

Share Prices

Counter NameLastChange
AEM Holdings3.1400.020
Avi-Tech Electronics0.4000.010
Best World Int.1.360-
China Sunsine0.3800.010
CNMC GoldMine0.2200.005
CSE Global0.4750.025
Food Empire0.5350.015
Golden Energy0.170-
GSS Energy0.0770.004
ISDN Holdings0.235-0.005
IX Biopharma0.2800.010
JB Foods0.490-
KSH Holdings0.3300.020
Medtecs Intl0.265-0.005
Moya Asia0.0670.002
Nordic Group0.2350.010
Oxley Holdings0.2450.005
REX International0.1950.011
Sing Holdings0.330-
Straco Corp.0.505-
Sunningdale Tech0.980-0.005
Sunpower Group0.4800.025
The Trendlines0.1110.001
Tiong Seng0.1620.002
Uni-Asia Group0.6200.030
Yangzijiang Shipbldg0.9950.025

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