| MAYBANK KIM ENG |
UOB KAYHIAN |
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Singapore Technology Bracing for a storm
Bracing shutdowns, demand and supply shock Except AEM, we slash earnings of the Singapore Tech universe to factor in factory shutdowns in Malaysia, supply chain disruptions, and demand risks. We downgrade VMS to HOLD, as we expect corporate capex appetite to plunge, while we upgrade Hi-P to HOLD as risks appear priced in. AEM, UMS and VALUE remain BUYs. Key risks to our view are if we have underestimated demand softness and/or overestimated dividends despite corporates’ healthy balance sheets and cash flow.
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Singapore Airlines (SIA SP) Lender Of Last Resort To The Rescue
As expected, Temasek has stepped in as a lender of last resort and availed SIA of substantial liquidity. This should alleviate default risk but SIA still faces a challenging environment. There is also the risk of funding requirements for its airline associates. Still, we have assumed a blue skies scenario with expectations of a recovery in traffic in Q2FY20. Maintain HOLD. Ex-all target price: S$5.80. Suggested ex-all entry level: S$5.20.
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| UOB KAYHIAN | DBS VICKERS |
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Wilmar International (WIL SP) Not Spared From COVID-19 Outbreak, But Business Is Relatively More Stable
Being in the consumer staple industry, Wilmar’s business operation is relatively more stable despite some negative impact on sales and operating costs. We adjust earnings down further to incorporate weaker demand for tropical oil segment in view of the drop in crude oil prices and demand disruption at major consuming markets such as India and Europe. No change to the listing of its China operations, which is expected to receive approval by mid-20. Maintain BUY. Target price: S$4.00.
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Centurion Corporation Rising pressures Downgrade to HOLD with revised TP of S$0.41.
Wide-ranging restrictions such as shutdowns and a closure of borders have been implemented in the UK and Australia. While occupancies for the current semester have been locked in, we see challenges for purpose-built student accommodation (PBSA) occupancies in the upcoming semester given the sizeable international student population. Domestic students who live near universities may also opt to stay at home. We have lowered average PBSA occupancies to c.78% for UK and c.70% for Australia. Similarly, the purpose-built workers accommodation (PBWA) segment faces a soft Singapore construction industry (which declined an estimated 4.3% y-o-y in 1Q20) and turmoil in the oil and gas (O&G) sector following a steep fall in oil prices. As a result, taking into account the segment’s resilience where Singapore PBWA occupancies have never fallen below 84%, we believe FY20F PBWA occupancies could decline to c.90%. Overall, we forecast FY20F and FY21F earnings to decrease by 16% and 9% respectively.
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