Singapore Strategy - Prepare with a shopping list
Shared By Stock Fanatic on Wednesday, February 7, 2018 | 7.2.18
■ Our Alpha list: we remove Memtech given its YTD outperformance, and add STE and China Sunsine;others remain: UOL, SMM, mm2, Yongnam and Sunningdale.
■ Our FSSTI target of 3,600 is intact.
Sighs of relief on correction
● Fears of US Fed Fund rate hikes and inflations, coupled with the Dow's plunge, snowballed into a falling FSSTI. Sectors that have fallen the most in the past two days are capital goods, gaming (-4.5%) and tech/manufacturing (4.9%) vs. FSSTI's -3.5%.
● Our bottom-up FSSTI target of 3,600 remains unchanged for now, with expectations 8% EPS growth for 2018F. Our technical chartist indicate that the near-term support for FSSTI may hover in the range of 3,370 and 3,470.
● We expect to see more earnings upgrades ahead in the non-REIT earnings season, potentially led by banks (on the back of lower credit costs, stronger loan growth and more aggressive NIM expansion), tech/manufacturing (steady volume increase), capital goods (higher order wins) and consumer/gaming (stronger topline growth).
Shopping list in preparation for a bounceback
● No one knows how long the correction will last but we see the opportunity to prepare a shopping list of 'must-own' stocks backed by fundamentals.
Our top-five picks are:-.
● Keppel Corp ‐ buy at S$7.95. S$7.95 would imply valuation of:
1) S$3.82 for KEP's property arm, at c.35% discount of RNAV, in line with current Singapore developer's valuations; and
2) S$1.02 for its O&M arm, at 1.2x FY18F P/BV, close to -1.5 s.d of its 10-year average. We see KEP backed by multiple catalysts e.g. 1) sale of deferred rigs to unlock cash, 2) O&M orders,
3) restarting the stopped-work semisubsible for Petrobras, 3) redevelopment plans for Singapore, and
4) land sale by Tianjin Eco City.
● Venture Corp ‐ buy at S$21.77 or 15.2x CY19F P/E (10-year average P/E). 2H is seasonally stronger for the company and we believe its business momentum is still strong with no disruption seen across its end-customers. Its well-diversified customer base and product portfolio makes it resilient. Catalysts could come from stronger-than expected revenue and margins.
● AEM‐ buy at S$4.70 or c.8x CY19F P/E. Our target price of S$6.62 is based on 10x CY19F P/E (18% discount to sector average of 12x). We believe AEM is on course to deliver 35% yoy earnings in FY18F, riding the firm sales forecasts from its major customer. Catalysts could come from stronger-than-expected earnings.
● Genting Singapore ‐ buy at S$1.20 or c.9x CY19F EV/EBITDA, close to -1 s.d. of its 6-year average. We believe the careful credit loosening in its VIP business could help to lift overall gross gaming revenue (GGR).
● STE ‐ buy at S$3.15 or 16x CY19F P/E, below its 5-year average of 20x. Assuming its peer SIA Engineering's recent earnings beat is an indication of returning engine MRO trend, we see STE benefiting due to its exposure to the CFM engines for narrow body aircraft. STE is relatively cheaper vs. SIE SP (>20x CY19F P/E). Catalyst could come from stronger-than-expected earnings from aerospace and marine. (Read Report)
Source : CIMB Research
Posted on Wednesday, February 7, 2018 |
With No comments
Join Me On: Facebook | Twitter | Google Plus ::: Thank you for visiting ! :::
Labels: Equity Strategy