ANALYSTS SAY: Buy, Sell, Hold (11 July '18)

UOB KAYHIAN

Offshore & Marine

2Q18 preview: stronger qoq for YZJ, hope for dividend for KEP

■ YZJ could be the only one in the sector to deliver stronger qoq earnings. KEP, SMM and SCI are likely to post weaker qoq earnings.

■ KEP could dish out a special 50th anniversary dividend on stronger balance sheet while SCI should see better utilities earnings with higher load factors in India.

■ YZJ should also see stronger qoq shipbuilding margin with the delivery of some 30 vessels in 2Q18 vs. 9 in 1Q18. There could be a positive impact from a weak Rmb.

■ SMM could see a net loss of c S$20m with little improvement in operating leverage.

■ Maintain sector Overweight as aggregate valuations are at c 1x CY18FP/BV or -1s.d of its 10-year mean vs. improving ROE of c. 7% . Orders are still the key catalysts.

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Asian Healthcare Specialists (AHSP SP)

Ageing Population Giving Orthopaedic Player A Leg-Up

AHS aims to be a one-stop integrated healthcare provider for all musculoskeletalrelated medical care. Tapping on inorganic growth for business expansion, AHS is exploring acquisitions to extend its capabilities. A proxy to increased medical spending from an ageing population and rising participation in sports, we expect FY19 to be the start of a multi-year growth story as AHS scales up to capture a bigger share of the market. Initiate with BUY with a PE-based target price of S$0.33.

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Golden Agri-Resources: Dim near term outlook

1Q18 was a challenging period for the palm oil industry, and market watchers are concerned about a production surplus in 2H18, due to seasonality and low production in 1Q18. Crude palm oil (CPO) prices have continued to trend lower in 2Q18, and are down about 6% so far this quarter. On the currency front, we note that so far this year, the IDR has also depreciated by about 5.9% against the USD with most of the loss happening in 2Q18. Based on GAR’s annual report, if the IDR weakens against the USD by 5% with all other variables remaining constant, the group’s pre-tax profit would have decreased by US$34.7m in 2017 and US$30.9m in 2016, likely impacted by translation losses as the group reports its financials in USD. Looking ahead, OCBC Treasury Research & Strategy (GT) continues to stay bearish over palm oil prices into 2H18. With weaker CPO prices and a dimmer outlook on earnings, we lower our valuation to 17x FY19F earnings and our fair value estimate drops from S$0.34 to S$0.30.

Singapore office

Where is the cap rate expansion?

 Manulife Centre potentially sold, at mid-2% yield based on net property income

 Potential transaction is a continuation of sale of fringe CBD office properties at “tight” yields

 Office REITs with better located properties are trading at a discount to these physical market transactions

 Maintain Overweight on office REITs – CapitaLand Commercial Trust (CCT; BUY, TP S$2.12) is our top pick

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