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Top pick for the day - MSCI Emerging markets

Shared By Stock Fanatic on Friday, August 28, 2015 | 28.8.15

LT downtrend is underway


MSCI Emerging Markets Index (MXEF) has been leading the way downwards in the recent months, 15.5% YTD compared to MSCI World Market Index (which tracks big and mid size companies in developed countries), which shed 3.5% YTD.

Phillip Futures Energy Daily Outlook - Rally in crude oil price sparked by strong US Q2 GDP. This puts a plug on the bearish momentum which should last for the week.


Fundamental and Technical Analysis
US Q2 annualized GDP figures was at 3.7%; sparking a rally in oil prices: It is almost as though the market is trying to find a reason for prices to move upwards. This was surprising as the current bearish momentum seemed resistant to past economic data as it continued to push prices down. This time with US Q2 GDP, prices seemed to react differently. A strong US GDP would indicate more demand for crude oil which is pushing prices up. Apart from demand effects, this strong Q2 GDP figures could increase the probability of a rate hike in Sep’15.

US natural gas inventories increased by 69B ft3 , which shows that inventories are holding stable: Although inventories are increasing higher than the previous week, we are seeing US natural gas inventories hovering below 2013 levels. Thus, continue to see this as a sign that inventories are not as robust as the markets put price out to be. On top of this, seasonal demand which will start in Oct should start to kick in. The markets should be starting to anticipate this and should increase in time.

Guocoland - Off to a flying start in FY16


Guocoland reported an in-line FY15 core net profit at just 4% short of our forecast. The 26% dip in the net profit number was largely due to a lower revaluation surplus. For FY16, we expect the bottom line to surge three-fold, boosted by significant asset divestment gains from the sale of an office tower in Shanghai Guoson Centre and its stake in Beijing Dongzhimen, as well as the continued marketing of units at Leedon Residences. Plans to relaunch Clermont Residence are also in the works. We maintain our Add call, with a slightly lower target price of S$2.71, based on a 25% discount to RNAV. Catalysts could emerge from recycling its capital into new developments.

Eu Yan Sang - Bitter Aftertaste

Eu Yan Sang (EYS) reported its first full-year loss of SGD0.6m for FY15 (Jun). We maintain our SELL recommendation with a lower TP of SGD0.36 (14% downside), pegged to 1x FY16F P/BV. Results were significantly below our expectations, mainly due to structural changes in Hong Kong, which has affected sales to parallel traders from Mainland China. While we think earnings have bottomed out, we expect the macroeconomic environment to remain challenging going forward.

Global Invacom Group - Completion Of Skyware Global

GlobalInvacom-Logo
Global Invacom announced that it officially completed the acquisition of Skyware Global on 24 Aug 2015 and delivered the CDP share transfer forms of 27.96m shares. This means that it is allowed to start purchasing treasury shares again, which it did on 26 Aug 2015, buying back another 7m shares at an average price of SGD0.22. Maintain BUY and SGD0.45 TP (11x FY16F P/E, 114% upside), as we are optimistic on a strong 2H15 turnaround.

Ezra Holdings - Subsea Sale Crystallises Value

Ezra-Chiyoda
Ezra has sold 50% of its subsea business (AMC) to Chiyoda Corp at an adjusted enterprise value (EV) of USD890m. It will receive USD180m in cash for the 50% stake in the equity of AMC, equivalent to 78% of its current market cap. Maintain TRADING BUY with a higher SGD0.36 TP (from SGD0.25, +216% upside), still imputing a 20% discount to the sale-EV for conservatism. The stock price currently values Ezra’s other listed subsidiaries below zero.

Innovalues - Fundamentals Unchanged


• Share-price weakness opens up buying opportunities. Management remained bullish in recent meeting.

• Weak China auto sales not affecting it. CNY devaluation positive for Innovalues & customers.

Maintain BUY & SGD1.18 TP at 14x FY16 EPS. Expect catalysts from better-than-expected margins and new customer wins. 5% yields attractive on single-digit valuations.

Silverlake Axis - Simulating for Transactions

• Market concerned that profits have been artificially inflated by interested-persons transactions.

• Profits could fall 49-64% if we adjust for these under three scenarios.

• Company needs to reassure investors that private entities are not subsidising its costs. Maintain HOLD & SGD0.61 DCF TP pending clarity on the transactions.

Ascendas REIT - A decent hiding place

Shared By Stock Fanatic on Thursday, August 27, 2015 | 27.8.15


We are upgrading AREIT to OUTPERFORM with a target price of S$2.59, implying total return of 24%. With the sell-off in equity markets, AREIT now trades at an FY16 yield of 6.9%.

AREIT has gone through the bulk of the conversions on its logistics assets to multi-tenanted buildings, while business park occupancies look to have bottomed with portfolio occupancy now at 88.8%.

AREIT extended its investment mandate to explore opportunities in mature markets, and plans to grow this to 20-30% of its portfolio. This is on the back of its sponsor winning the bid for GIC's ~S$1.1 bn logistics portfolio in Australia. The devil will be in the details for any potential deals, but further acquisitions could provide some support to DPU growth amid lacklustre organic growth.

With volatile markets we expect defensives to be in favour, while the decline in stock prices has improved the risk-reward for the sector, making the REITs a more conducive place to hide, at least in the rest of the year. We believe, Retail is the most benign (CMT and FCT), followed by Industrial (KDCREIT, MINT, AREIT)

ST Engineering - Defensive and oversold


We believe STE's 18% share price decline in the past month is overdone and ignores its resilient military business which represents one-third of sales as well as strong orderbook of S$12.4 bn that should provide significant earnings visibility.

While we were previously concerned about its China, Brazil and commercial aerospace exposure, we believe this have now been priced in as remaining goodwill in Brazil is S$3 mn, and consensus earnings estimates have been brought down and do not seem to incorporate a turnaround in Aerospace.

STE has a strong balance sheet, with a net cash position of S$460 mn as at June 2015. However, we expect potential headwinds for Marine with lower oil prices driving a decline in orders, and for Land Systems with further writedowns in China.

STE is currently trading at a current P/B of 3.9x, below its 08-09 low of 4.3x. Its 2016E P/E of 15.5x is close to one standard deviation below its historical average. We expect its share price to be supported by its attractive dividend yield of 5.4%. Upgrade to NEUTRAL.

Singapore Market Strategy - Looking for stability


Positioning for growing macro uncertainty
Increasing concerns about the exposure to slowing growth in China and ASEAN, as well as weak domestic economic datapoints have led to a sharp decline in the MSCI Singapore index. We believe the muted outlook could translate to weaker earnings for Singapore corporates, with consensus MSCI Singapore EPS now expected to be flat in 2015, and could turn negative with further earnings cuts—particularly in commodity-related sectors.

CapitaLand Commercial Trust - Upgrade to Buy: The pull-back is overdone


• No change in our fundamental office market view

• We believe recent share price pull-back is overdone; implied pricing of assets at a substantial discount to physical market

TP unchanged at SGD1.65; we upgrade to Buy (from Hold) on valuation grounds
**** Recommendation ****
 
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