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UOB KAYHIAN |
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HRnetGroup Limited Best candidate in town
■ HRnetGroup is the only listed proxy for labour markets in Singapore & China. ■ We like its asset-light and fairly-defensive business model, with the twin earnings growth engines of professional recruitment and flexible staffing. ■ Net cash of S$270m (at end-2Q18) available to fund North Asian expansion. Potential 16-22% upside to FY19-20F EPS from M&As not factored in. ■ We initiate coverage with Add and TP of S$1.10, pegged to 18x CY20F P/E.
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Oversea-Chinese Banking Corporation (OCBC SP) Redefining Customer Engagement Through Digital Transformation
OCBC wants digital transformation to permeate across its commercial banking, wealth management and insurance businesses, instead of setting up a separate digital bank. It will leverage on data analytics and AI to provide customer service and generate new sales. Its SME customers are “born digital”, having signed up for digital banking from day one. It has also started deploying smart ATMs to provide frequent services performed by bank tellers. Maintain BUY. Target price: S$13.68. |
| MAYBANK KIM ENG | OCBC |
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Koufu Group Ltd (KOUFU SP) Winner Winner, Chicken Dinner
Dual-income households offer a captive market With dual-income families becoming the norm (66% of households), more Singaporeans are eating out on a daily/weekly basis (24%/51%), and frequenting affordable food courts and coffee shops for their regular meals. Koufu’s island-wide network of 47 food courts and 14 coffee shops is thus well placed to tap on this growing trend.
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Golden Agri-Resources: Waiting for better news
According to the US National Oceanic and Atmospheric Administration’s (NOAA) Climate Prediction Center, there is a 50-55% chance of an El Nino onset during the Northern Hemisphere fall 2018 (Sep-Nov), increasing to 65-70% during winter 2018-19. Should weather conditions turn severe, it could have a negative impact on total palm oil production subsequently. A decrease in overall supply would increase prices, should demand stay the same. However, despite the impending El Nino weather conditions, crude palm oil prices have failed to rally, likely due to the factors affecting demand. In India, an uptick in import tax has increased the cost of imported palm oil to buyers. In the EU, there is a shift from non-sustainable palm oil sources. For Golden-Agri, though production is expected to increase for the rest of this year, palm oil prices remain weak. Another reason that could have contributed to the share price weakness so far is likely the depreciation of the IDR, which we also highlighted in our earlier reports. Meanwhile, with weak CPO prices, we lower our P/E from 17.5x to 16x FY19F earnings and as such our fair value drops from S$0.26 to S$0.24. |
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PHILLIP SECURITIES |
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United Overseas Bank Limited Loans growth intact and least affected by trade war SINGAPORE | BANKING | UPDATE
In near-term, loans growth not expected to be affected by trade war and property cooling measures. High single-digit loans growth target for FY18 remains reasonable. Rising interest rate unlikely to have a significant impact on credit quality but cost of funds is expected to increase in tandem. Operating costs is expected to stay elevated with investments in technology for business expansion. We raise our dividend forecast to S$1.19 per share in favour of a 50% pay-out ratio. Maintain BUY with target price of S$33.70 (previous TP S$34.50) based on Gordon Growth Model. The decrease in target price was due to our lower ROE assumption to 11.6% (previously 11.8%) and lower BV assumption to S$21.30 (previously S$21.6/share).
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Check out our compilation of Target Prices
