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MAYBANK KIM ENG |
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Citic Envirotech (CEL SP) Backed By Healthy Orderbook And Good Project Win Momentum
With an orderbook of more than Rmb6b as of end-18 and strong projects win momentum of more than Rmb2b ytd, CEL has built a good foundation for growth. CEL is in a good position to tap on China’s commitment to combatting environmental pollution. The weak 1Q19 results were due to a project delay and a more conservative revenue recognition method. CEL trades at 9.3x 2018 PE and 0.7x P/B, 1SD below its long-term mean.
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Singapore Banks Lower rates. Limited impact
SIBOR forecast cuts to have limited impact for now On the back of heightened risks of Fed-rate cuts, MKE’s economics team has dropped its Singapore 3-month SIBOR forecasts by 20bps to 1.8% for 2019E and by 40bps to 1.6% for 2020E. This could squeeze NIMs and net interest income (NII) for banks. Our sensitivity analysis suggests that the impact in FY19 will not be material. This year’s SIBOR has averaged 41bps higher than a year ago and banks have locked in higher loan yields in categories such as mortgages. Lower interest rates may also defer their NPL cycle and keep credit charges low, mitigating the margin squeeze. An economic pick-up may result in higher loan growth while the yield-seeking may drive wealth- and fund-management fees. Overall, we believe the sector will be able to defend dividends. Remain POSITIVE. We continue to prefer UOB.
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OCBC |
DBS VICKERS |
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Ascott Residence Trust: A smaller margin of safety
Ascott Residence Trust (ART) has posted total returns of 24.5% since the start of the year, as compared to the FTSE Straits Times REIT Index’s 20.0% and the Straits Times Index’s 10.1%. We continue to like ART for its highly geographically diversified portfolio of high quality assets amidst the ongoing macroeconomic uncertainties. That said, we believe valuations are stretched as at 24 Jun’s close. According to Bloomberg consensus, ART is trading at a 5.58% blended forward dividend yield, more than 2 standard deviations below its ten-year average. We believe investors in ART may find comparative value in Keppel DC REIT (KDCREIT). Like ART, KDCREIT also boasts a quality portfolio of assets and substantial geographical diversification. In addition, we like KDCREIT for its long WALE of 8.0 years and believe that the data centre sector will be more resilient, relative to the serviced residences sector – this is a plus, should the trade war uncertainties persist past President Trump and President Xi’s meeting at G20. KDCREIT is currently trading at a 4.88% blended forward dividend yield according to Bloomberg consensus, which we believe is an undemanding valuation relative to its risk-profile.
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Sembcorp Group
Parent support on debt re-profiling • Parent SCI to provide SMM with S$2bn loan for debt re-profiling and working capital • Funded by issuance of S$1.5bn 5-year bonds and existing resources / facilities • Eases concerns of an imminent cash call by SMM • Order wins remain the key driver for earnings recovery
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Check out our compilation of Target Prices
