. Sources: MasNet, Bloomberg, Business ... headwind for the group's joint project
Asia Pacific Equity Research | Singapore
MARKET
PULSE
Morning Call 12 Jul 2018
Key Idea DBS: Eyes still on the ball Last week’s property cooling measures have weighed on property and banking stocks, but less for the latter. Based on 1Q18, housing loans accounted for 22% of DBS’s loans book versus 26% for OCBC and 28% for UOB. During the previous cooling measures, property stocks took a significantly longer period to recover, while banks were able to derive growth from other areas which helped to lessen the impact and resulted in share price outperformance. We believe DBS deserves a higher premium than its regional peers. We lowered our valuation to 1.7x book (in line with the decline in regional peers from 1.6x to 1.5x), dropping our fair value from S$34.60 to S$32.67. At current price, dividend yield is 4.6%. Maintain BUY. More reports Singapore Press Holdings: In-line set of 3Q results
News Headlines PACC Offshore Services Holdings Ltd has entered into a JV with Kerry TJ Logistics to provide an integrated solutions platform for offshore wind farm developers, EPCI contractors and wind turbine manufacturers in Taiwan. Kencana Agri Limited has divested its entire equity stake in PT Sawit Alam Permai for a total cash consideration of IDR3.2b. Interra Resources Limited has completed development well CHK 1210 in the Chauk oil field in Myanmar as an oil producer. RH Petrogas Limited has signed new 20-year production sharing contracts for the Kepala Burung contract area and the Salawati Kepala Burung contract area in Indonesia.
Research Team (65) 6818 4815 e-mail:
[email protected]
Sources: MasNet, Bloomberg, Business Times, Straits Times and other media
Please refer to important disclosures at the back of this document.
OCBC Investment Research Market Pulse 12 Jul 2018
DBS: Eyes still on the ball
Singapore Press Holdings: In-line set of 3Q results
Less impacted by cooling measures DBS deserves a premium Fair value of S$32.67
SPH’s 3QFY18 results were broadly within expectations. Operating revenue fell 3.8% YoY to S$250.1m, brought about primarily by a 8.0% drop in media revenue. The YoY decline in print ad revenue continues to slow down over the course of sequential quarters. Revenue for the group’s property segment dipped 2.4% YoY to S$60.1m, while revenue from the other businesses rose S$6.1m YoY to S$22.0m. On a 9MFY18 basis, operating revenue of S$742.5m constituted 74.5% of our full-year estimates. PATMI for 3QFY18 rose 64.3% YoY to S$47.4m, on the back of lower impairment charges taken in the latest quarter. The group appears ready for expansion into the aged care space overseas, leveraging its Orange Valley brand in Singapore. While there are some positives to be taken away from the latest quarter, the recent Singapore property cooling measures could be a potential headwind for the group’s joint project with Kajima Development, The Woodleigh Residences. Pending further details from an analyst briefing today, we maintain our HOLD rating but place our fair value estimate of S$2.52 under review. (Joseph Ng)
Party pooper in the form of harsh cooling measures Last week, the Singapore authorities unexpectedly announced more property cooling measures. This is reminiscent of the cooling measures introduced in Jan 2013, which led to a 4.5 years decline in residential property prices in Singapore. This round, there is an increase in additional buyer’s stamp duty (ABSD) and the loan-to-value ratio was brought down by 5% across the board. Will the impact last more than 4.5 years? From Jan 2013 to the trough in 2016, the Real Estate index shed 28.4% before staging a recovery starting in early 2017. From early 2017 to October 2017, the index gained 33% touching a new 5-year high. Unfortunately, with the latest round of cooling measures, the resultant sharp sell-down brought the index down 13.2% YTD. Key real estate developer stocks bore the brunt of the uncertainty and fell sharply. Based on historical trends from 2013, the impact is more severe for property stocks than banking stocks. Outlook still healthy Based on 1Q18, housing loans accounted for 22% of DBS’s loans book versus 26% for OCBC and 28% for UOB. Together with last Thursday’s (5 Jul 2018) bumper sales of >1000 units during the four hours post the announcement of the cooling measures, we expect this to lessen the impact of slower new loans growth this quarter. However, the longer term potential drop in transaction volumes could impact loans growth. With the new set of measures, we expect the pace of consumers switching banks for mortgage loans to also come off. The recent regional selldown has brought valuations lower, but we still believe DBS deserves a higher premium than its peers in this region. We have dropped our valuation to 1.7x book (in line with the decline in regional peers from 1.6x to 1.5x), dropping our fair value from S$34.60 to S$32.67. At current price, dividend yield is 4.6%. (Carmen Lee)
2
OCBC Investment Research Market Pulse 12 Jul 2018
Calendar of key events 9-Jul-18
10-Jul-18
11-Jul-18
12-Jul-18
13-Jul-18
CN Jun Foreign Reserves
SPHREIT SP 3Q18
SPH SP 3Q18
US Jun CPI
CN Jun Money Supply (10 Jul - 15 Jul)
SG Jun Foreign Reserves (4 Jul - 9 Jul)
CN Jun PPI
US Jun PPI Final Demand
SG May Retail Sales
CN Jun Trade Balance
CN Jun CPI
US May Wholesale Inventories
CN Jun Exports CN Jun Imports SG 2Q18 GDP (9 Jul - 13 Jul)
16-Jul-18
17-Jul-18
18-Jul-18
19-Jul-18
20-Jul-18
SBREIT SP 2Q18
FIRT SP 2Q18
US Jun Housing Starts
KEP SP 2Q18
CT SP 2Q18
US Jun Retail Sales Advance
US Jun Industrial Production
SATS SP 1Q19
SMM SP 2Q18
CN 2Q18 GDP
SG Jun Non-oil Domestic Exports
CN Jun Retail Sales CN Jun Industrial Production
23-Jul-18
24-Jul-18
25-Jul-18
26-Jul-18
27-Jul-18
MLT SP 1Q19
ART SP 2Q18
SUN SP 2Q18
SIA SP 2Q18
M1 SP 2Q18
US Jun Existing Home Sales
MINT SP 1Q19
US Jun New Home Sales
US Jun Wholesale Inventories
SGX SP 4Q18
SG Jun CPI
US May FHFA House Price Index
US Jun Durable Goods Orders
US 2Q18 GDP Annualised
US Jul Manufacturing PMI
SG Jun Industrial Production
30-Jul-18
31-Jul-18
1-Aug-18
2-Aug-18
3-Aug-18
MAGIC SP 1Q19
CACHE SP 1Q19
US Jun Construction Spending
US Aug FOMC Rate Decision
UOB / SCI / VMS SP 2Q18
CN Jul Non-manufacturing PMI
US Jul Manufacturing PMI
US Jun Factory Orders
US Jul Change in Nonfarm Payrolls
CN Jul Manufacturing PMI
US Jul ISM Manufacturing
US Jun Durable Goods
US Jun Trade Balance
SG Jun Money Supply
CN Jul PMI Mfg
SG Jul Purchasing Managers Index
US Jul Unemployment Rate US Jul ISM Non-manf. Composite
6-Aug-18
Notes:
7-Aug-18
8-Aug-18
9-Aug-18
10-Aug-18
CIT SP 2Q18
US Jul PPI Final Demand
CD SP 2Q18
CN Jul Trade Balance
US JunWholesale Inventories
US Jul CPI
CN Jul Exports
CN Jul PPI
CN Jul Imports
CN Jul CPI
Sourced from Bloomberg All US Tech results dates have been adjusted to Singapore dates. US Initial jobless claims are released every Friday. MBA mortgage applications are released every Wednesday.
3
OCBC Investment Research Market Pulse 12 Jul 2018
ANALYST DECLARATION: For analysts’ shareholding disclosure on individual companies, please refer to the latest reports of these companies.
DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without the written consent of OCBC Investment Research Private Limited (“OIR” or “we”). This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein or to participate in any particular trading or investment strategy. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. In the event that you choose not to seek advice from a financial adviser, you should consider whether investment in securities and the securities mentioned herein is suitable for you. OverseaChinese Banking Corporation Limited (“OCBC Bank”), Bank of Singapore Limited (“BOS”), OIR, OCBC Securities Private Limited (“OSPL”) and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. The information provided herein may contain projections or other forward looking statements regarding future events or future performance of countries, assets, markets or companies. Actual events or results may differ materially. Past performance figures are not necessarily indicative of future or likely performance. Privileged / confidential information may be contained in this report. If you are not the addressee indicated in the message enclosing the report (or responsible for delivery of the message to such person), you may not copy or deliver the message and/or report to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Bank, BOS, OIR, OSPL and their respective connected and associated corporations shall be understood as neither given nor endorsed.
RATINGS AND RECOMMENDATIONS: - OIR’s technical comments and recommendations are short-term and trading oriented. - OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIR’s BUY rating indicates a total expected return in excess of 10% based on the current price; a HOLD rating indicates total expected returns within +10% and -5%; a SELL rating indicates total expected returns less than -5%. - For companies with market capitalisation of S$150m and below, OIR’s BUY rating indicates a total expected return in excess of 30%; a HOLD rating indicates total expected returns within a +/-30% range; a SELL rating indicates total expected returns less than -30%.
Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Private Limited
Published by OCBC Investment Research Private Limited
Important4disclosures
