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PHILLIP SECURITIES |
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Singapore Banking Monthly Rates growth stagnates
September’s 3M-SORAwas up1bpsMoM to 3.70%andwas 7bps higher than the 3Q23 average of 3.69%. 3M-HIBOR was down 3bps MoM to 4.95%. Singapore domestic loans dipped 6.71% YoY in August, below our estimates. The loan decline was slightly larger than in the previous month. The CASA balance dipped slightly to 18.8% (Jul23: 18.9%). 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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Singapore REITs Monthly: Sep23 Repositioning for the Fed pause
S-REITs Index fell 3.2% MoM, with the bulk of the losses coming in the last 2 weeks after the FOMC held interest rates unchanged and indicated that rates will likely remain higher for longer. S-REITs are now trading at a forward dividend yield of c.6.4%, 0.5 s.d. above the mean of 6.1% and a P/NAV of 0.86x, 2.0 s.d. below the mean of 1.03x. We think this could signal an attractive opportunity to reposition into S-REITs for the eventual interest rate pause and decline. We remain OVERWEIGHT on S-REITs but are more selective. We prefer REITs with a healthy balance sheet, strong sponsor and improving operating metrics such as the hospitality and retailsub-sector. Catalysts are expected from pick-up in the economy and asset recycling. Top picks are CapitaLand Ascott Trust (CLAS SP, ACCUMULATE, TP S$1.20) and Frasers Centrepoint Trust (FCT SP, ACCUMULATE, TP S$2.35).
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CGS CIMB |
CGS CIMB |
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Japfa Ltd Recalibrating growth amidst uncertainties
■ We think Japfa Ltd (JAP) returned to profitability in 3Q23F, supported by better ASPs of DOCs and swine in Indonesia and Vietnam, respectively. ■ Nevertheless, swine prices in Vietnam are falling while corn prices in Indonesia are rising in Oct, which could stymie JAP’s recovery in 4Q23F. ■ We believe 2H23F will see a lower net profit of US$35.5m (vs. our previous forecast of US$66.5m), which is insufficient to lift FY23F into profitability. ■ Reiterate Reduce, with an unchanged TP of S$0.20. The gradual turnaround in profitability going into FY24F should limit downside risks, in our view.
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Seatrium Ltd Empire Wind timeline remains on track
■ New York PSC rejected RE developers’ petitions for power sale contract price increases to incorporate inflation and supply chain impact. ■ STM does not see an impact on timeline for EPC contract work on Equinor and BP’s Empire Wind farms. Other offshore projects are progressing well. ■ We reiterate our Add call with a TP of S$0.19, based on 1.5x CY24F P/BV.
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UOB KAYHIAN |
LIM & TAN |
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SATS (SATS SP) Gradually Improving Outlook With Stablising Global Air Cargo Demand
During UOB Kay Hian’s Asian Gem Conference, management updated that the integration of SATS and WFS has been progressing well and the global air cargo demand appears to be stabilising. We expect SATS to show sequential earnings improvement in the next few quarters but the realisation of its full earnings potential may only happen in FY26 (2025). Maintain BUY. Target price: S$2.99.
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Grand Banks Yachts (S$0.315, down 0.5 cents) has released its FY23 annual report and we highlight several points raised and highlighted in the report: “Against the backdrop of the challenges related to the pandemic a year ago, and growing geopolitical and economic uncertainty, it is indeed gratifying to report our best financial performance in more than 10 years. The Group is also working closely with partners to introduce sustainable fuels and hybrid engines to future boat models as part of our commitment towards sustainability.” At S$0.315, GBY is capitalized at S$58.2mln and trades at 5.8x P/E and 0.8x P/B. GBY has increased its number of workers back to preCovid levels to meet order backlog and reduce wait time, positioning the company well to build on its strong FY23 performance. We see positives in its 1) resilient order book of S$159.4mln which provides revenue visibility for 1-2 years, 2) margins expansion to mitigate inflationary pressures, 3) net cash position of S$35.4mln in this current economic climate, and 4) capacity expansion to bring in more orders and long-term growth. Maintain Accumulate on Grand Banks Yachts. |
