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UOB KAYHIAN |
UOB KAYHIAN |
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Banking Benefitting From Structural Tailwinds; Healthy Competition For Customer Relationships
Highlights • Singapore banks are supported by structural tailwinds, including continued influx of safe haven liquidity and broad-based trend of monetary tightening, which remains intact. We expect banks to report healthy 3Q26 results. • OCBC and UOB offer attractive interest rates of 1.7% on new 12-month fixed deposits in October. We do not expect these seasonal promotions to degenerate into a price war. DBS would be least affected given its strong deposit franchise with high CASA ratio of 54.4% and low LDR of 73.5%. • Maintain MARKET WEIGHT. BUY OCBC (Target: S$35.70) for its diversified growth from wealth management (63% of its fee income), trading income and insurance. We upgrade DBS to BUY (Target: S$83.60) due to its resilient deposit franchise and attractive 2027 dividend yield of 4.7%.
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Food Empire Holdings (FEH SP) Meeting Highlights: Strong Brand Equity Supports Inflation Resilience; Russian Risks Warrant Differentiated Assessment
Highlights • FEH’s strong brand equity and extensive distribution network provide an operational hedge against prolonged inflation, supporting demand resilience, pricing power and potential market-share gains. • FEH’s Russian operations remain unaffected by recent measures against Nestlé. While geopolitical risks remain, the development should not be directly extrapolated to FEH or justify excluding Russian earnings from its valuation. • Maintain BUY and target price of S$3.49. FEH trades at an attractive 12.2x 2027F PE, a 39% discount to peers’ 20x.
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| LIM & TAN | LIM & TAN |
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NTT DC REIT (US$0.935, unchanged) announced on 8 October 2026 that its manager is proposing amendments to its management fee structure to better align its interests with those of Unitholders. The proposed changes will link performance fees directly to year-on-year distribution per unit (DPU) growth, replacing the existing fee structure based on net property income (NPI). Additionally, the manager intends to revise the pricing mechanism for management fees paid in units to minimise potential dilution to existing Unitholders. Both proposals will be subject to Unitholders’ approval at an extraordinary general meeting (EGM) scheduled for 6 November 2026. NTT DC Reit’s market cap stands at US$973.7mln and currently trades at 0.8x PB, with a dividend yield of 5.1%. Consensus target price stands at US$1.21, representing 28.7% upside from current share price. We view the proposed changes positively, as they better align management’s interests with Unitholders through DPU-linked performance fees while mitigating potential dilution, further strengthening the REIT’s investment appeal given its discount to NAV and attractive dividend yield.
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The Business Times reported that Singapore mainboard-listed ST Engineering / STE (S$10.42, down 9 cts) officially opened its new commercial airframe maintenance, repair and overhaul (MRO) facility within Changi Airport on Friday (Oct 9). STE’s market cap stands at S$32.5bln and currently trades at 30x forward PE and 12x PB, with a dividend yield of 1.8%. Consensus target price stands at $11.85, representing 13.7% upside potential. STE’s newest MRO facility aims to use AI and automation to boost productivity within the repair ecosystem, supported by global air traffic growth and Changi T5. We continue to maintain an Accumulate rating on ST Engineering on the backdrop of increased geopolitical tensions and a robust order backlog. |
| OCBC GROUP RESEARCH | |
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Initiation: Yangzijiang Shipbuilding (YZJSGD SP) - Bigger dividends support sustained earnings growth and industry- • Next growth leg emerging: LNG carrier ambitions, expanding
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