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Banking – Singapore The Trend Is Your Friend
Monetary policy has reached an inflexion point as G7 countries have experienced a rapid recovery from the COVID-19 pandemic. BOC and BOE have scaled down their bond purchase programmes as well. We expect the transition in monetary policy from accommodation to tightening to trigger a re-rating for Singapore banks, pushing valuations toward upcycle levels. BUY OCBC (Target: S$15.50), followed by DBS (BUY/Target: S$35.45). Maintain OVERWEIGHT.
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Singapore Telecommunications Ltd Help from Bharti and A$ SINGAPORE | TELECOMMUNICATIONS| 2H21 RESULTS 31 May 2021
FY21 revenue met but EBITDA was below, at 91% of our FY21 estimate. Excluding exceptionals, PATMI declined 22% in 2H21. Bharti’s(BHARTI IN, Not Rated) turnaround and a 9% appreciation of A$ in 2H21 boosted earnings. Final DPS was slashed by 56% to 2.4 cents. Exceptional losses of S$1.1bn in 2H21 included impairment of S$589mn for Amobee and S$336mn for Trustwave. Hat trick of write-offs plus Hooq totalled S$1.18bn in the past two years. Singtel announced a new strategic direction with an emphasis on 5G consumer and enterprise in Singapore and Australia, NCS as a new engine of growth and valueunlocking of infrastructure assets. No surprises. We are wary of value-unlocking as it is unclear whether it will involve disposals or mere refinancing. We reduce FY22e EBITDA by 13% to factor in weaker Singapore mobile and Australia broadband earnings. Maintain NEUTRAL with SOTP TP lowered to S$2.32 from S$2.44, incorporating lower associate valuations. Outlook is sluggish with minimal growth in core operations and indifferent dividend yields of 3.7%.
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PHILLIP SECURITIES |
MAYBANK KIM ENG |
Sembcorp Industries Transition to pan-Asian sustainable solutions leader SINGAPORE | ENERGY | UPDATE
Sustainable solutions portfolio to be 70% of profits by 2025, up from current 40%. Urban business land sales to triple to 500 hectares by then. ROE of 10% and gross debt to equity at 1.3x by 2025 from 3.2% and 2.3x respectively. We raise our target price to S$2.07 from S$1.77 as we peg SCI to 1.0x FY21 P/B, up from 0.85x previously, as we believe the detailed layout of its five year plan will drive a re-rating of the stock. However, as most positives have been priced in, and its ambition of transforming its portfolio is now new, we downgrade from ACCUMULATE to NEUTRAL. Sembcorp Industries unveiled its strategic plan to transform its portfolio from brown to green, with growth powered by its renewable and integrated urban solutions businesses. It is positioning itself to be a leading pan-Asian provider of sustainable solutions.
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Sarine Technologies (SARINE SP) The sparkling gem
Ride the earnings upcycle; Initiate BUY Sarine mainly engages in the development and manufacturing of advanced systems for diamond technologies. We are initiating coverage with a BUY and DCF-based TP (WACC: 8.6%, LTG: 2%) of SGD0.70. Our intrinsic value implies 17.9x FY21E P/E and 14.4x FY22E P/E, compared to >20x during the previous upcycle. We expect Sarine to post cyclical earnings uplift in tandem with the recovery of the global diamond industry. The successful dual listing on Tel-Aviv Stock Exchange by 2Q21 and better-than-expected adoption rate for its e-Grading could further catalyse the stock.
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