| UOB KAYHIAN | CIMB |
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TIANJIN ZHONGXIN PHARMACEUTICAL GROUP CORPORATION (TIAN SP) Awakening Giant: Reforms Underway With Lucrative Targets
In its first-ever investor plant trip, TJZX’s new Chairman acknowledged the firm’s prior slack and promises to awaken the sleeping giant. Their target is to “double in three years” and we believe it is possible to double drug manufacturing profits by 2020. The necessary reforms have been laid out and management interest will be profit-aligned due to a proposed profit-linked remuneration plan. Given the TCM industry’s bright outlook, reiterate BUY with target price raised to US$1.52.
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REIT RevPAR could climb to peak levels come 2019F
■ While market consensus projects a meaningful recovery in 2H18F, we are calling for an earlier- and stronger-than-anticipated recovery in industry RevPAR. ■ Unlike the other rising sub-segments, such as residential and office, which could face higher supply come 2021F, hotels have minimal new supply further out. ■ Assuming that demand continues to dial up, the cyclical recovery could potentially lead to a multi-year upswing – one which we urge investors to position for. ■ Reiterate Overweight on the hospitality sub-sector. Upgrade CDREIT and FEHT from Hold to Add, and retain Add on OUEHT and Hold on ART.
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| OCBC | RHB |
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Sembcorp Marine: Upgrade to HOLD
Following Keppel Corp’s (KEP) announcement last Saturday that its O&M unit will pay fines totalling US$422m (S$570m), Sembcorp Marine’s share price corrected 5% from S$1.94 on 22 Dec to S$1.85 on 29 Dec before benefitting from strong oil prices on 2 Jan to close at S$1.87. Keppel Corp’s share price fell from S$7.34 on 22 Dec to S$7.29 on 26 Dec but recovered subsequently to close even higher at S$7.53 yesterday. The divergence in share price performance is likely due to SMM’s O&M pure play status and relatively smaller asset base compared to KEP. SMM also announced on 26 Dec that it has inked an agreement to sell the semi-submersible rig West Rigel to a buyer at a price of US$500m. Compared to the US$568m price tag that was agreed on with the original owner, Seadrill’s North Atlantic Drilling, this is only 12% lower, illustrating the relative resilience in prices for quality assets built by yards like SMM. With the less than 5% downside to our FV of S$1.78, we upgrade our rating on SMM to HOLD.
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OUE Hospitality Trust Early Refinancing Provides Another Boost
Early refinancing of OUEHT’s debts would result in interest savings and uplift DPU by 2-3%. This places it in good shape ahead of the expected interest rate hikes. The REIT is also a primary beneficiary of the rebound in the hospitality segment with SG Hospitality expected to see 3-7% RevPAR growth in 2018. Key catalysts ahead would be higher corporate demand from more events in 2018, tapering of hotel supply and Changi Airport’s continued rise as a regional travel hub. Maintain BUY with a higher TP of SGD0.91 (from SGD0.88, 7% upside).
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| MAYBANK KIM ENG | |
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Singapore Economics 4Q GDP Cools, 2018 Growth Normalizing to Potential
4Q Advance GDP Moderates as High Base Kicks In GDP growth moderated to +3.1% in the fourth quarter of 2017 from a year ago due to high base effects after the +5.4% growth in the third quarter. On a quarter-on-quarter seasonally adjusted annualized basis, GDP also softened to +2.8% (vs. +9.4% in 3Q17). For the whole of 2017, GDP came in at +3.5% (vs. +2.0% in 2016), which is the fastest pace of growth since 2014 and at the top of MTI’s forecast range of 3% to 3.5%. We raise our full year GDP growth for 2017 to 3.5% (from 3.4%), in line with Prime Minister Lee’s New Year speech. We forecast GDP growth at 2.8% in 2018, cooling off from the manufacturing-driven surge in 2017. Services and construction will contribute a greater proportion of growth in 2018.
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