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First REIT

Attractive yield


■ 3Q/9MFY18 results were slightly below our projection.

■ New acquisitions underpin revenue growth, gearing of 34.9% provides debt headroom for inorganic growth opportunities.

■ Upgrade to Add from Hold, TP tweaked down slightly to S$1.36.


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Singapore Airlines: Are we in a crisis like 2008?



The share price of Singapore Airlines (SIA) has dropped 23% from its peak of S$11.80 around end May this year, and is now trading at its 52-week low. At the current price of S$9.15, this is close to the 2008 low of S$9.05 and is just 11% higher than the 2002-2003 SARS crisis low of S$8.25. At 0.8x forward P/B, valuation is also close to 2008 lows as well. We share the market’s concerns about rising fuel prices but we note that 1) for FY19, about 45% of SIA’s fuel needs are hedged, 2) SIA’s current share price is now even lower than previous instances when Brent was trading at much higher levels. Overall passenger load factors are generally stronger so far this year, and while we expect upcoming 2QFY19 results to be impacted by Virgin Australia, the depressed valuations that SIA is trading at means there is limited downside risk from here. There is also good upside should passenger and cargo yields turn out to be better than expected. Upgrade to BUY with S$10.71 FV estimate.


DBS Group Holdings (DBS SP)

3Q18 Results Preview: Double-digit Growth In Net Interest Income


We expect DBS to achieve 16% yoy growth in net interest income due to NIM expansion of 13bp yoy and a sequential recovery in net trading income due to wider spreads as a result of increased volatility in regional currencies. Higher income helped DBS absorb the pick-up in credit costs. We forecast net profit of S$1,386m, up 3.9% qoq and up 72.8% yoy (3Q17 was a low base on huge provisions for exposure to the O&G sector). Upgrade to BUY with a new target price at S$29.50.


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Keppel DC REIT

Portfolio remains stable



 3Q18 revenue was 5.3% higher than expected, due to higher rental top up which is recognised periodically

 3Q18 DPU was 4.1% lower than expected, due to Capex Reserves set aside for KDC SGP 3 and KDC SGP 5

 9M18 revenue and DPU met 79% and 73% respectively, of consensus FY18 expectation

 Maintain Accumulate; unchanged target price of $1.45


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What is the street missing out?

Street FY19F/20F earnings projections have bottomed out.

The street is overly concerned about profitability of new businesses and under estimating the magnitude of cost savings over FY18- 20. The street is also missing out on an annual cost savings of ~S$30m due to shutdown of StarHub’s co-axial cable network after 2020. Besides, the street is not paying attention to potential network sharing which may further boost free cash flow. StarHub is attractive near -2SD of its historical EV/EBITDA and PE average and offers sustainable yield exceeding ~5.5%.


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LionelLim8.16Check out our compilation of Target Prices

Share Prices

Counter NameLastChange
AEM Holdings3.430-0.010
Avi-Tech Electronics0.265-0.010
Best World2.5300.010
Broadway Ind0.1080.001
China Sunsine0.465-
Food Empire0.735-
Fortress Minerals0.4000.025
Geo Energy Res0.320-
Golden Energy0.810-0.010
GSS Energy0.047-
ISDN Holdings0.6050.020
IX Biopharma0.120-0.002
Jiutian Chemical0.081-
KSH Holdings0.340-
Leader Env0.0720.010
Medtecs Intl0.148-
Meta Health0.021-0.001
Nordic Group0.470-
Oxley Holdings0.143-0.002
REX International0.2150.005
Sinostar PEC0.180-
Southern Alliance Mining0.610-0.015
Straco Corp.0.5000.020
Sunpower Group0.3950.020
The Trendlines0.098-
Totm Technologies0.1030.001
UG Healthcare0.176-0.003
Uni-Asia Group0.9050.005
Wilmar Intl3.960-0.070
Yangzijiang Shipbldg1.3000.010

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