ANALYSTS SAY: Buy, Sell, Hold (19 Oct 2016)

CIMB

M1 Limited 3Q16: A topline problem

■ 3Q16 results below expectations. M1 cut its FY16 net profit guidance.

■ Weaker mobile service revenue due to lower excess data usage and roaming.

■ EBITDA margin fell yoy on softer mobile revenue and higher handset subsidies.

■ FY16F/17F/18F core EPS cut by 9.6%/8.3%/9.4%.

■ Maintain Hold with a 9% lower DCF-based target price of S$2.55.

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MayBank Kim Eng

Keppel REIT (KREIT SP) Weathering the storm Maintain BUY and SGD1.21 TP

3Q16 income was broadly inline. We fine-tune our DPU estimates by <1%, retain our BUY rating and SGD1.21 TP, based on a target yield of 5.25%. We expect KREIT to trade at record low yields. This is sustained by the global hunt for yield assets amid the persistently low interest rate environment and relatively stable capital values of office properties. We believe a strong bid for Central Boulevard’s land tender could be seen as positive for sector sentiment. Furthermore, latest (3Q16) office rent estimates by CBRE are showing early signs of a bottom with the pace of rent decline slowing.

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OCBC

ST Engineering: Recording a one-off S$61m charge in 3Q16

Singapore Technologies Engineering (STE) announced last evening that it will be recording a one-off charge of ~S$61m for 3Q16 to write down investments in its 75.3%-owned Chinese subsidiary, Jiangsu Huaran Kinetics (JHK). JHK is a JV between STE’s land systems arm (ST Kinetics) and China’s state-owned enterprise Jiangsu Huatong Machinery, and it has started the process for the cessation of production from yesterday in order to reduce its operating loss. Hence, STE has also taken the prudent approach to record the charge, which consists of ST Kinetics’ net carry value in JHK and closure costs, given the likely scenario that production will cease. As this is a non-recurring and one-off charge to write-down a loss-making subsidiary, we are keeping our forecasts unchanged for now until 3Q16 results are announced before trading hours on 10 Nov 16. Maintain HOLD on STE, with an unchanged FV of S$3.13 (based on 19x FY17F EPS).

UOB KayHian

Keppel REIT (KREIT SP) 3Q16: Portfolio De-risking Through Active Leasing

Results were in line with expectations. Proactive leasing efforts saw renewal of all leases due in 2016, leaving marginal leases due in 2017 and 2018. Nascent signs of office rental stabilisation and aggressive execution, coupled with flight to quality to its super prime offices, should tide KREIT through choppy waters when supply headwinds threaten in 2017. Maintain BUY with an unchanged target price of S$1.31.

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