ANALYSTS SAY: Buy, Sell, Hold (21 Feb '18)

StarHub (STH SP) : FULLY VALUED

Cost escalations a bane

• Excluding one-offs, net profit for 4Q17 was below expectations

• Acquisition-led growth in the enterprise segment helped offset losses in mobile and Pay TV

• The counter is expensive despite a decent dividend yield

• Maintain FULLY VALUED with an unchanged TP of S$2.20

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Telecom Sector: Switch from Starhub to Singtel

All three listed telecommunications service providers (telcos) in Singapore ended CY17 with muted results pointing to one direction – heightened competition in a saturated market translating to underperformances. Singtel, helped by the fact that it has a diversified earnings base, was the only telco which met our expectations. Looking ahead, the telecom sector will remain under pressure with the entry of two new Mobile Virtual Network Operators (MVNOs) as well as the impending entry of TPG. In a saturated market, we expect mobile ARPUs as well as broadband ARPUs to decline ahead, translating to weaker service revenue for the telcos. That said, while share prices have also been correcting since mid-CY16, there is tremendous unjustifiable disparity between the valuations of Singtel and Starhub, especially since Singtel has a more resilient earnings outlook. Hence, in our view, we recommend investors to switch out of Starhub [SELL; FV: S$2.20] and into Singtel [BUY; S$4.15]. We reiterate our positive view on Singtel’s longer-term outlook given its focus to grow its cyber security, ICT solutions capabilities, digital advertising and other digital-related businesses. For M1 [HOLD; FV: S$1.70], we deem it fairly valued at current price level. All considered, maintain NEUTRAL on the Telecom sector.

Sembcorp Industries

Detaching India?

■ SCI is streamlining its Indian operations under SEIL for greater synergy.

■ This could be a precursor for the listing of its Indian assets. Pegging to Indian power peers (8-10x 12M forward EV/EBITDA), we estimate SEIL to be worth S$1bn-2.3bn.

■ We believe SCI is likely to retain c.40% stake on the Indian assets having spent years developing the market.

■ We expect the above to be announced at the company's full-year results briefing on Friday morning, 23 Feb, together with update on its ongoing strategic review.

■ Maintain Add and SOP-based target price of S$3.87.

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Bumitama Agri (BAL SP)

4Q17 Results Preview: Expect Lower yoy Earnings

We cut 2017-19 net profit estimates by 9%, 6% and 9% respectively to factor in lower FFB production growth and a higher effective tax rate for 2017. We forecast 4Q17 net profit of Rp330b-370b (stronger qoq but weaker yoy). Maintain BUY but we trim target price to S$0.96. We like BAL for its young tree-age profile which spells strong production which can offset the low CPO ASP, and consistently high OER.

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PHILLIP SECURITIES

Oversea-Chinese Banking Corp

Stellar performance across all segments

SINGAPORE | BANKING | 4Q17 RESULTS

 4Q17 PATMI of S$1,033mn was in line with our estimates

 NII increased 14% YoY on the back of strong loans growth and higher NIM

 WM fee income grew 38% YoY on the back of strong AUM growth

 Net trading income weaker YoY and QoQ as global FICC trading environment remains weak.

 Upgrade to BUY with a higher TP of S$13.94 (previous TP S$13.48) based on Gordon Growth Model.

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