| UOB KAYHIAN |
OCBC |
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NetLink NBN Trust (NETLINK SP) Pursuing Steady Residential Fibre Connection Growth
We expect NetLink to meet our FY19 net profit forecast of S$73m and DPU may exceed IPO projections by 5% at an annualised DPU of 4.88 cents. This translates to attractive net dividend yields of 5.8% and 6.0% for FY19-20 respectively. We continue to like the company for defensive earnings (high barriers of entry), stable cash flow (90% of earnings are recurring in nature) and potential beneficiary of TPG’s mobile coverage plan. Maintain BUY. Target price: S$0.92.
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Market: Buy SG banks on further price correction
On Sunday, Trump said he would increase tariffs on US$200 billion of Chinese imports. Equity markets reacted and fell on Monday. The probability of an increase in tariffs has now moved higher. Reflective of this, the VIX index has also spiked up to 15.44 on Monday, up 20% from 12.87 on Friday. Since April, we have been downgrading several stocks, largely on valuation grounds as the market has posted good YTD gains. As of 3 May, the STI was up 11.8% YTD. We recently downgraded both DBS and UOB to HOLD, largely on valuation grounds. With Monday’s correction, share prices of both banks have come off about 4.3-4.5% from last Friday’s closing prices. At current prices, both stocks have already corrected sharply and are now below our recommended re-entry price levels as mentioned in the reports of both banks. With estimated dividend per share of S$1.20, dividend yield is around 4.5-4.6%. While price actions could be volatile in the next few days, for longer term investors looking for exposure to the Singapore banking sector, we recommend gradual accumulation on price weakness. |
| CGS CIMB | DBS VICKERS |
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CSE Global 1Q19: Systems go live from 2Q19F
■ 1Q19 core net profit of S$4.6m was in line with expectations at 21% of our and Bloomberg consensus FY18 estimates (S$21.7m/S$21.7m). ■ Revenue was down (-7.4% yoy) but largely due to delays in project deliveries for the Americas. These projects are slated to kick-start from 2Q19F. ■ End-1Q19 order backlog at S$182.1m (end-4Q18: S$181.0m). Maintain Add and TP based on 13.5x CY20F P/E (near 5-year mean: 13.1x).
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Frasers Property Ltd
Asset recycling to drive growth Maintain BUY; TP of S$2.30. We maintain our BUY rating on Frasers Property Ltd (FPL) and TP of S$2.30, due to its limited exposure to Singapore residential property and its strong recurring income profile. FPL’s valuation remains attractive at 0.7x P/NAV and its dividend yield is the highest among developers at 5%.
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Check out our compilation of Target Prices
