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PHILLIP SECURITIES |
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Phillip 3Q23 Singapore Strategy Slower for longer
2 July 2023 Review: Singapore's equity market drifted downwards in 2Q23 with a decline of 1.6%. Despite record earnings, banks disappointed over worries about the sustainability of their interest margins (Figure 1). Conversely, SIA’s share price witnessed a stellar performance after reporting record profits (Figure 2). The underperformers in the quarter were cyclicals and stocks with disappointing earnings (Figure 4).
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Singapore Banking Monthly Singapore interest rates remain flattish
June’s 3M-SORA was up 3bps MoM to 3.64% and 3M-HIBOR was up 43bps MoM to 4.84%. Singapore domestic loans dipped 4.88% YoY in May, below our estimates. The loan decline has slightly reversed from the previous month. CASA balance is flat at 18.8% (Apr23: 18.8%), the first in 14 months. Maintain OVERWEIGHT. We remain positive on banks. Bank dividend yields are attractive at 5.7% with upside surprise in dividends due to excess capital ratios and push towards higher ROEs. SGX is another major beneficiary of higher interest rates (SGX SP, BUY, TP S$11.71).
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PHILLIP SECURITIES |
UOB KAYHIAN |
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Property Sector Lentor Hills Residence – living amidst nature
We conducted a site visit to Lentor Hills Residence, a JV project between Intrepid Investments Pte. Ltd (a wholly owned subsidiary of Hong Leong Holdings Limited) (50%), GuocoLand Pte. Ltd (30%), and TID Residential Pte. Ltd (20%). Project Background The Lentor Hills Residence is situated on a land area of 17,136.9 square meters, prominently positioned at the junction of Lentor Central and Lentor Hills Road. Around 59% of the units are 1 to 2 bedders. Prices of the one- bedroom units (450 sft) start from around S$945k while the two-bedrooms (from 665 sft) are priced from S$1.36m. The development consists of 598 residential units. Its strategic location offers convenient access to Lentor MRT station, a short walk away, which is part of the Thomson-East Coast line connecting to Shenton Way.
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STRATEGY – SINGAPORE Alpha Picks: Adding SIE, CSE And REXI While Removing MLT
Our Alpha Picks portfolio continued its market-beating run in Jun 23, beating the STI by 2.9ppt on an equal-weighted basis, helped by industrial stocks. Our portfolio’s performance on a qoq basis was even better, bettering the STI by 8.8ppt. For Jul 23, we add SIE and CSE due to favourable tailwinds while also including REXI as a SELL call. Our Alpha Picks portfolio has now beaten the STI in 15 out of the past 16 months.
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| LIM & TAN | LIM & TAN |
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We highlight LHN Limited (S$0.365, down 1 cent) to be a beneficiary of the co-living boom with its co-living business (Coliwoo) poised to be the key growth driver over the next few years from positive uplifts in demand, significant increases in capacities as well as higher room rates.
LHN’s market cap stands at S$149.3mln and trades at 0.7x P/B, with a forward dividend yield of 6.3%. LHN currently trades at 5.4x core forward P/E, 0.5SD below its mean P/E since IPO. We continue to like LHN’s 1) Coliwoo brand name in a booming co-living market, 2) strong pipeline of projects across all segments, 3) various initiatives currently being explored to enhance shareholder value, and 4) cheap valuations despite a brightening outlook. We initiate BUY on LHN Limited with a 12-month target price of S$0.50, pegged to 7.5x core FY23F P/E (25% discount to core historical average P/E of 10.0x), representing a potential upside of 37.0%
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ST Engineering ($3.68, up 4 cents) announced changes to its Group Executive Committee (EXCO), introducing a strategic role dedicated to driving the Group’s growth in Smart City and Digital businesses, and appointing a new EXCO member. Tan Lee Chew, current EXCO member and President Commercial, will take on newly created positions as Group Chief Commercial Officer (Market Development) and President Smart City & Digital Solutions.
Overall, we continue to like ST Engineering due to its:- (i) expected earnings growth forecasted for FY23 and FY24 where contributions from Transcore would start becoming more significant; (ii) attractive and sustainable dividends; and (iii) robust order book. For FY23F and FY24F, we are anticipating its net profit to come in at S$579.5mln (+8.3% yoy) and S$677.6mln (+16.9% yoy) respectively. Recommend ACCUMULATE. |
