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MAYBANK KIM ENG |
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Banking – Singapore Headwinds From Uncertainties Have Receded; Fragile Optimism For Recovery On The Mend
Geopolitical risks from the escalation in trade conflict and hard Brexit are subsiding, which will lead to a gradual recovery in business confidence. A further fall in NIMs would be arrested by the stabilisation in interest rates after three “insurance” cuts in the Fed funds rate. We expect NIMs to stabilise starting 2H20. We also expect the impact from new digital-only banks to be manageable as an omni-channel approach is required to meet customers’ multi-faceted needs. Maintain OVERWEIGHT.
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UMS Holdings (UMSH SP) Room for upside
Thesis playing out; Maintain BUY SEMI’s year-end update for 2020 global semiconductor manufacturing equipment sales of USD60.8b is 3.4% higher than its mid-year estimate; it also sees a new high in 2021. Further, SEMI sees upside if macro conditions improve and trade tensions ease. We believe this validates our bullish thesis on UMS, a beneficiary of sustained logic/foundry equipment spending, with memory to follow. Maintain BUY with ROE-g/COE-g based TP of SGD1.13 (2.2x FY20E P/B).
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| RHB | CGS CIMB |
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Suntec REIT (SUN SP) A Turnaround Year; Top Pick
Keep BUY and SGD2.08 TP, 13% upside plus 5% yield. It is our commercial REIT Top Pick on attractive valuation and organic earnings growth. Key catalysts are healthy positive rent reversion from key asset, Suntec City, and earnings contributions from three development assets. Suntec REIT was a laggard in 2019 – we believe the market was focusing on headline DPU fall, instead of operational income growth. Valuation remains attractive as it trades at 0.86x P/BV (vs office REITs’ 1x).
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Boustead Singapore Ltd FY3/20 set to be a year of two halves
■ We maintain Add on Boustead with TP of S$1.00, as we expect PATMI growth to accelerate to 20.6% yoy in 2HFY3/20F (1H20: +1.4% yoy). ■ Energy segment could make a comeback with a major contract (50% of segment orderbook) starting to contribute in 3QFY20F. ■ Earnings from geospatial segment will be back-loaded in 2HFY20F, as federal elections in key markets resulted in slower government spend in 1H.
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Check out our compilation of Target Prices
