| MAYBANK KIM ENG | UOB KAYHIAN |
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Singapore Airlines (SIA SP) Long-haul to pinch 2QFY17 earnings Rising competition in the long-haul segment SIA’s 2QFY17 result (out on 3 Nov) is not looking good given the 1.5% YoY lower overall (passenger + cargo) load factor and tough yield outlook. We forecast 2QFY17 core net profit of SGD193m (-7.8% YoY, +85% QoQ), bringing 1H17 core net profit to SGD297m (+55% YoY). We deem this as below expectation, equal to 38% of our full-year FY17 forecast. Accordingly, we cut our FY17-19 earnings forecast by 15.3%, 18.4%, and 19.1%, respectively on lower yield and load factor assumptions. Our TP has been slightly trimmed to SGD9.70 based on an unchanged FY17 P/BV of 0.86x, which is its long-term mean.
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REITs − Singapore 3Q16: Results Of SGREIT, CDREIT And FHT In Line With Expectations SGREIT saw contributions from Singapore and Malaysia mitigate weaker overseas performance in the quarter. Maintain BUY with a lower target price of S$0.97 (down from S$1.00). CDREIT saw continued weakness on waning corporate demand and renovation disruption. Maintain HOLD with a reduced target price of S$1.46 (down from S$1.55). FHT saw DPU dilution from October’s rights issue. Maintain BUY with a reduced target price of S$0.80 (down from S$0.81). Maintain OVERWEIGHT.
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| OCBC SECURITIES | |
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DBS: 3Q slightly ahead; buying ANZ wealth and retail business in Asia DBS this morning announced net earnings of SG1.07b, flat YoY and +2% QoQ, and this is slightly above market estimate of S$1.04b based on a recent Bloomberg poll. Net Interest Income was flat YoY at S$1.82b, while Non-interest Income showed both YoY and QoQ improvement to S$1.11b. Net Interest Margin (NIM) came off from 1.87% in the previous quarter to 1.77% this quarter. Allowances went up substantially from S$178m in 3Q15 and S$366m in 2Q16 to S$436m in 3Q16. Exposure to the Oil & Gas portfolio has come off about S$3b from the previous quarter to S$20b. The exposure to the Commodity sector fell S$1b to S$14b. NPL ratio rose from 1.1% in the previous quarter to 1.3% this quarter. Management is guiding for midsingle digit growth in loan and non-interest income for 2017. The group has also announced that it is acquiring the wealth management and retail banking business of ANZ in Singapore, Hong Kong, China, Taiwan and Indonesia for S$110m above book value. This acquisition is expected to add S$23b to its wealth AUM, bringing the total to S$182b. We will provide more details after the briefing. We are maintaining our BUY rating, but will re-visit our earnings estimates and fair value post the result briefing.
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| PHILLIP SECURITIES | DBS VICKERS |
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United Overseas Bank Limited Posturing for more returns from higher risks
3Q16 NPAT of S$791mn was down 7.8% y-o-y attributed by a 4.7% y-o-y decrease in non-interest income and higher allowances 3Q16 NIM decreased 8bps y-o-y to 1.69% (3Q15 NIM: 1.77%) but increased 1bps q-o-q (2Q16 NIM: 1.68%) 3Q16 NPL was higher y-o-y at 1.61% (3Q15: 1.26%) and higher q-o-q (2Q16: 1.44%) Maintain to "NEUTRAL” with a lower target price of S$17.63 (previously S$17.95) pegged at unchanged 0.95x FY16F PBR (excluding preference shares)
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CDL Hospitality Trusts Unloved now but offers outstanding value Attractive valuations. We maintain our BUY call on CDL Hospitality Trusts (CDREIT) with a revised TP of S$1.59. Although we now expect the Singapore market to only recover in 2018, we believe the current low share price has largely priced in the current downturn and CDREIT offers compelling long-term value given its Singapore portfolio trades on a heavily discounted implied price per key. In addition, CDREIT offers patient investors an attractive 6.8% yield (based on 90% payout ratio) ahead of the eventual upturn.
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