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Banks DBU funding supported by FCY deposits
■ DBU deposits rose a modest 0.4% mom (+S$3.2bn) in Aug 20, but what stood out was the +S$2.8bn (+11.5% mom) resurgence in FCY deposits. ■ System loans slid for the fifth straight month – contracting 0.7% mom in Aug 20. Manufacturing, loans for general commerce and to FIs were the worst-hit. ■ Higher credit card charge-off rates and pick-up in personal loan drawdowns could make a case for an extension of loan moratoriums in Singapore. ■ Reiterate Neutral. We expect funding costs to trend downwards as liquidity remains flush – alleviating some NIM pressure over 3Q-4Q20.
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Japfa Ltd (JAP SP) Too Cheap To Ignore
Attractive valuation. Japfa is an industrial agri-food company, which produces animal feed, poultry, swine and dairy products in emerging Asian markets. Its key markets include Indonesia, Vietnam and China. Currently trading at 6.8x FY19F P/E (c.7.6x P/E post-rights issue), we think its valuation is very attractive relative to peer average (10x FY21F P/E). Moreover, it has been generating record-high trailing 12-month PATMI since its IPO, and we see potential improvement in its 4Q20F Indonesia earnings.
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DBS VICKERS |
UOB KAYHIAN |
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SATS Investment Thesis
Recovery play for vaccine approval. We assume recovery to preCOVID-19 levels for international air travel to occur in 2022 (FY23F) and expect the stock to re-rate and normalise ahead of vaccine approval in 2021. Our healthcare team expects two vaccines to be available by CY1Q21. Buy for 29% upside.
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Venture Corporation (VMS SP) Better Growth Prospects Of Clients Warrant A Re-rating; Upgrade To BUY
Consensus revenue forecasts of Venture’s Test & Measurement and Life Sciences/ Medical clients show a strong recovery in 2021, to levels comparable or better than in 2019. Venture deserves to trade at a higher valuation, given better earnings prospects of its clients, sustainable dividend yield of 3.9% and outperformance vs peers, with net margin of about 10% even during the challenging environment in 1H20. Upgrade to BUY with a 35% higher target price of S$23.76, or +1SD to mean PE of 19.4x on 2021F earnings.
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Check out our compilation of Target Prices
