| PHILLIP SECURITIES |
MAYBANK KIM ENG |
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United Overseas Bank Limited Aggressive pursuit of deposits bites NIM
1Q19 revenue and PATMI were in line with our estimates, meeting 25% and 24% of our full-year forecasts respectively. NIM fell 5bps YoY and 1bps QoQ to 1.79% due to competitive loan repricing conditions and excess deposits gathered. LDR fell to 86.6% (4Q18: 88.2%). Robust loans growth of 12.2% YoY was led by a broad-based increase across all territories and industries. Trading income and gain from investment securities rose 38.9% YoY and 133.3% YoY, benefitting from a rebound in financial markets. Allowances for non-impaired assets rose in tandem with loan growth while asset quality remained resilient with NPL ratio at 1.5% (1Q18: 1.7%). Downgrade to ACCUMULATE with a lower target price of S$30.90 (previously S$32.00), due to recent share price movement. The lower target price was derived after raising our operating expense forecasts 5% higher, giving us an FY19e CIR of 44% (previously 42%).
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First Resources (FR SP) Expect a slow start to the year
Low output and price to kick off the year FR is likely to deliver a set of relatively weak 1Q19 results on low output and CPO price, buffered by drawdown of its huge inventory brought forward from 2018. Maintaining forecasts for now as we expect stronger output and CPO price in the coming months. We reiterate our BUY call with an unchanged TP of SGD2.03 on 17x FY19 PER peg, its 5Y mean. We continue to like FR for its medium-term growth prospect, cost efficiency.
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| OCBC | CGS CIMB |
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StarHub Ltd: More post-paid ARPU erosion awaits
Starhub’s 1Q19 results were within our expectations. Revenue rose 6.0% YoY to S$596.8m, boosted by higher contribution from the Enterprise Business and Sales of equipment. 1Q19 PATMI fell 14.2% YoY to S$54.0m, which constitutes 27.7% of our full-year forecast. The group has declared a DPS of 2.25 S-cents, which is a steep but well-expected cut from 4 S-cents in 1Q18. Post-paid mobile ARPU dropped by S$4 YoY to S$39; management believes this would likely continue until end-2019. The group continues to articulate its intention to capture opportunities in the Cyber security business, but the timeline as to when it turns EBITDA positive remains unclear. Since our downgrade in mid-Feb, the stock has declined by 16.8%. Starhub is now trading at an EV/EBITDA multiple of 6.3x, which is 2.3 S.D. below its 5 –year mean. On valuation grounds, we maintain our FV of S$1.64 but upgrade our rating from Sell to HOLD.
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Sembcorp Marine Positive operating leverage
■ We are relieved that SMM made a profit of S$1.7m in 1Q19, with EBIT margin close to 1%, vs. operating loss in FY18. ■ YTD orders at S$175m vs. our S$2bn forecast. Management is still hopeful of orders given the strong enquiries for its production units. ■ 2H19F could see some improvement in EBIT margin and provision write-back with delivery of projects. Maintain Add and TP of S$2.21.
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