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SingTel - Opportunity Beckons

Shared By Stock Fanatic on Thursday, March 15, 2018 | 15.3.18

We believe Singtel’s 7-14% underperformance over the past 6-12 months, following the share price sell-down, offers a good opportunity to accumulate, with forward EV/EBITDA valuations at -1SD of its historical 5- year mean. Competitive risks, while still prevalent in Singapore, India and Indonesia, are buttressed somewhat by the improving risk-reward profile at Optus and Singtel’s decent forward dividend yield of 5%. Maintain BUY on our preferred Singapore telco with an unchanged SOP-based TP of SGD4.10 (20% upside).

SmallCaps - Who says Singapore is boring?

■ We list six reasons why Singapore is fun and identify four entertainment stocks to give investors the best bang for their buck ‐ mm2, Cityneon, Unusual, KMEN.

■ mm2’s core production business is currently priced at 60% discount to peers’ average of 21x FY18F P/E. We also see earnings growth potential in all its other segments.

■ We like Cityneon for its strong IP portfolio, growth prospects and attractive valuation.

■ Unusual is a proxy for increasing global demand for live events, in terms of product offering and geographical reach.

■ We keep Kingsmen Creatives (KMEN) on our radar for NERF delivery and foray into IP business.

Singapore Market Strategy - Every dog has its day

Shared By Stock Fanatic on Wednesday, March 14, 2018 | 14.3.18

● With Singapore cyclicals vs defensives P/B valuation gap of 0.22x close to historical lows, and global growth momentum peaking, we believe defensive laggards are starting to offer attractive risk-reward.

We use Credit Suisse HOLT® to run two screens to identify underperforming stocks where

(i) market-implied Cash-flow return on investment (CFROI) is low relative to history, and

ii) forecast CFROI is expected to improve from historical levels.

Our analysts believe ST Engineering, ComfortDelgro, SGX, ThaiBev and SingPost appear to have clear turnaround drivers and catalysts.

● Street sentiment is generally cautious on these names, while they would bear the bulk of institutional net selling from 2016. On a market-cap weighted basis, these five stocks offer a dividend yield of 4.0%, above MSCI Singapore dividend yield of 3.2%.

● We adjust our model portfolio by adding weight to these five stocks. This is funded by a lower weight in consumer discretionary, property and tech sectors. With our positive view on economic and earnings growth, our two largest overweights remain in banks, and offshore and marine.

Venture Corporation Ltd - A developer of next generation products

● Growth partly driven by a next-gen consumer device. We believe that one other product (aside from genome sequencing machines) that has partly contributed to its strong growth was due to the launch of a next-generation consumer device – iQOS.

● We expect iQOS to contribute ~14% of revenue in FY18. According to PMI’s management, iQOS device contributed ~US$160/900 mn to PMI’s sales in FY16/17. Based on our estimates, ~3 mn and ~11 mn units of iQOS device was sold in FY16/17, and we expect ~20/23/26 mn units of iQOS device to be sold in FY18/19/20. We believe that iQOS contributed ~S$421 mn or 11% of Venture’s overall revenue in FY17.

● Not a one-trick pony. Aside from iQOS and Novaseq, we believe that Venture likely has other businesses that are displaying strong growth too, given that the T&M/Med segment excluding Novaseq and iQOS grew 54% YoY in FY17, based on our estimates.

Stay OUTPERFORM. We like Venture as it would launch more next-gen products that will drive growth with better margins. Net cash position of S$721.6 mn as of 4Q17 represents ~33% of NAV.

Singapore Strategy - Earnings bubbling

Shared By Stock Fanatic on Monday, March 5, 2018 | 5.3.18

■ The 4Q17 results of Singapore corporates were not impressive, with underachievers outnumbering those that beat expectations 15 to seven.

■ This shows that corporates are still grappling with costs and kitchen-sinking. However, overall EPS still held up, mainly led by banks and manufacturing sectors.

■ Order book upgrade in capital goods also added meat to forward EPS expectations; we see risks of disappointment by mid-18 if orders do not trickle in.

■ Our bottom-up target for FSSTI now stands at 3,705, based on 14.2x 2018F P/E (+0.5 10-year mean) vs. 10% yoy EPS growth for 2018F.

Our Alpha picks are SMM, VMS, UOL, GENS and STE (big caps); and AEM, China Sunsine, Yongnam and mm2 (small caps).

Wilmar International Ltd - Higher dividend payout in anticipation of China listing

Shared By Stock Fanatic on Tuesday, February 27, 2018 | 27.2.18

● Wilmar’s FY17 core net profit rose 7% YoY to US$1,047 mn, in line with consensus, as higher contributions from Oilseeds and Grains and non-operating gains were partially offset by weakness in Tropical Oils and Sugar. A final DPS of S$0.07 was proposed, which would bring total DPS to S$0.10 in FY17 (39% payout ratio), an increase from S$0.065 in FY16.

● Strong growth in Oilseeds and Grains was driven by good crush margins and strong manufacturing sales. Sugar was impacted by an impairment loss of US$30.6 mn on Australian refinery business as well as the timing of the sugar sale.

● Chairman and CEO of Wilmar, Kuok KH, expects crush utilisation to remain high in 1Q18 and is the most bullish on its flour business in the near term and rice business in the medium term.

● The listing of China operations is on track, with management targeting a listing by mid-2019. Management noted that higher-thanexpected dividend payout in FY17 was partly due to the expectation of the China listing coming through. We raise our 2018-19E EPS by 3-4% due to higher-margin assumptions. Maintain NEUTRAL.

Sembcorp Industries Limited - New report: Carrying a difficult child

● Following a strategic review, Sembcorp Industries announced a double-digit ROE target to be achieved within five years. This will largely be driven by initiatives in Utilities.

● Despite being a key drag to group ROE, there was no strategic update on Sembcorp Marine, which management believes is well positioned for a recovery through its gas solutions and enhanced yard capabilities.

● On our estimates, SCI's ROE is still likely to remain below 10% in 2020E. This is largely driven by a more moderate increase in Marine ROE to 6% in 2020E from 0% in 2017E, despite our above consensus new order forecast of S$4 bn in 2018-19E. As such, we believe stronger than expected new orders or margins by Marine are required to achieve SCI's ROE target.

We maintain NEUTRAL and reduce our target price to S$3.70 from S$3.90 due to lower Utilities estimates. We prefer Sembcorp Marine (OUTPERFORM, TP S$3.00) where we see greater scope for positive surprise with a recovery in new orders.

Sembcorp Marine - Look beyond weak near-term earnings

Shared By Stock Fanatic on Thursday, February 22, 2018 | 22.2.18

■ Wider-than-expected loss in 4Q17 partly due to cost overrun for several projects’ variation orders

■ Slashed FY18/19 forecasts by 54-58% to reflect operating loss at current activity level; earnings improvement slipping into 2H18

■ Declared 1 Sct final dividend

■ Potential price pullback offers healthier entry point; TP adjusted to S$2.90
Modified by : Stockfanatic
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