Singapore banks kept at 'overweight' by KGI with 'buy' for DBS, OCBC

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: KGI Fraser

Price Call: BUY

Target Price: 22.38

Stock Name: OCBC Bank
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: KGI Fraser

Price Call: BUY

Target Price: 11.63

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: KGI Fraser

Price Call: HOLD

Target Price: 23.04

SINGAPORE (Mar 18): KGI has initiated coverage on Singapore banks with "overweight", despite interest rates going up.

It has called out DBS (target price: $22.38) as its top pick, while OCBC (TP: $11.63) takes second place; both with "Buy" calls. UOB (TP: $23.04) is the least favoured, which KGI keeps at "Hold".

According to KGI, as US Federal Reserve raises interest rates, net interest margin (NIM) is expected to go up.

UOB kept at 'neutral' by Goldman Sachs with $25 target price

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Golman Sachs

Price Call: HOLD

Target Price: 25.00

SINGAPORE (Feb 16): Goldman Sachs is maintaining its "Neutral" call for United Overseas Bank (UOB) with an unchanged target price of $25 as the bank's 4QFY15 net profit was within expectations.

UOB reported 4Q14 net profit of $786 million with weaker profits q-o-q due to lower non-interest income.

The bank then held an analyst briefing and here were the main takeaways for Goldman Sachs.

Asset quality remained manageable this year, albeit non-performing loans (NPL) rose 3% q-o-q owing to accounts in Indonesia, Thailand and Singapore.

UOB upgraded to "buy", target raised to $26.70 by Maybank Kim Eng

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Maybank Kim Eng

Price Call: BUY

Target Price: 26.70

UOB upgraded to "buy", target raised to $26.70 by Maybank Kim Eng

(MORE TO FOLLOW)

UOB upgraded to "accumulate" by PhillipCapital

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Phillip Securities

Price Call: BUY

Target Price: 25.40

SINGAPORE (Oct 31): PhillipCapital has upgraded United Overseas Bank Ltd (UOB) to "accumulate" from a "neutral" rating with a target price of $25.40, after the latter posted its improved 3Q14 financial results.

At 1:56 pm, UOB has rallied 2.1% to $22.94 as one of the top gainers across the Singapore Exchange.

PhillipCapital analyst Benjamin Ong said in a note today that UOB management believed that fee growth momentum should continue to be maintained for the rest of the year.'

SG: MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO (6 Nov 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.68

Stock Name: SATS
Company Name: SATS LTD.

Research House: OCBC

Price Call: HOLD

Target Price: 3.35

Stock Name: Vard Holdings
Company Name: VARD HOLDINGS LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.80

MARKET PULSE: UOB, SMM, SATS, Vard, Swiber, CMA/CRCT, COSCO

6 Nov 2013

KEY IDEA UOB: Exceeded expectations UOB's 3Q13 net earnings of S$730m were above market expectations, and this was led by both YoY and QoQ improvements in Net Interest Income despite lower Non-interest Income. In addition, its Net Interest Margin (NIM) also stabilized at 1.71%, bucking the downtrend seen at the other two banks. Management is cautiously optimistic about its prospects, although it expects loans growth to be slower in 2014 versus 2013. While Indonesia and Thailand faced recent economic and political uncertainties, we do not expect this to have a lasting impact on UOB's long-term regional franchise and business. Overall, our earnings projections are still largely intact for both FY13 and FY14, and we are retaining our fair value estimates of S$22.97. Maintain BUY. (Carmen Lee) MORE REPORTS Sembcorp Marine: Business as usual; waiting for new yard ramp-up Sembcorp Marine (SMM) reported an 85.9% YoY fall in revenue to S$1.66b and a 12.3% increase in net profit to S$129.7m in 3Q13, within our expectations. Operating margin in 3Q13 was 10.1%; though on the lower side, this is still within management's guidance of 10-13% for this year. With the commencement of operations in the new Tuas yard, ship repair revenue rose 34% YoY. After securing new orders worth about S$3.9b YTD (vs our full year estimate of S$4b), the group's net order book stands at S$13.5b with deliveries extending till 2019. With the more conservative profit recognition stance adopted by management for at least this year, we lower our earnings estimates by 3-7% for FY13-14F. However, as we roll forward our valuations to FY14F earnings, our SOTP-based fair value estimate rises slightly from S$5.64 to S$5.68. Maintain BUY. (Low Pei Han) SATS Ltd: Same story as 1QFY14 SATS's 2QFY14 results came in below expectations. Revenue fell for the second straight quarter (-2.0% YoY to S$452.1m) following declines in the food solutions segment, and EBITDA and PATMI fell 11.6% YoY to S$65.7m and 3.2% YoY to S$48.7m, respectively, as a result of higher staff costs. Management declared an interim dividend of 5 S cents, similar to last year's amount. For 2HFY14, we expect revenue to decline further due to the full-year impact of Qantas' relocation to Dubai, and margins should stay compressed as well. With the weakened 2HFY14 outlook, we leave our fair value estimate unchanged at S$3.35 and maintain our HOLD rating. We foresee limited upside at this juncture and on-going tapering expectations may have a negative impact on dividend-yielding counters like SATS. (Lim Siyi) Vard Holdings: 3Q13 results below our expectations Vard Holdings Limited (VARD) reported its 3Q13 results this morning which fell short of our expectations. Revenue decreased by 3.5% YoY to NOK2,370m, while PATMI plunged 66.7% to NOK76m. However, this was a reversal from the net loss of NOK20m suffered in 2Q13 as VARD had taken an impairment of goodwill on its Niteroi yard in Brazil then. For 9M13, revenue and PATMI dipped 6.3% and 68.6% to NOK8,062m and NOK244m, forming 68.0% and 52.0% of our previous FY13 forecasts, respectively. Meanwhile, VARD also announced last evening that it has secured a new contract worth NOK55m for the construction of a survey vessel for Circle Maritime Invest JSC, with delivery scheduled in 3Q14. We place our Sell rating and S$0.80 fair value estimate under review, pending an analyst conference call with VARD's management and also due to a change in analyst coverage. (Wong Teck Ching Andy) Swiber Holdings: Disposes Kreuz for S$256.2m Summary: Swiber Holdings announced last evening that SEA9 Pte Ltd, an investment-holding company wholly-owned by The Headland Private Equity Fund 6 L.P, has proposed to acquire Swiber's entire 57.5% stake in Kreuz Holdings for S$0.80/share, translating to a consideration of S$256.2m for Swiber. Due to a netting agreement in which all trade and other receivables as well as payables between Kreuz and Swiber are set-off and settled, Swiber will receive S$129.2m in cash out of its S$256.2m consideration. The offer of S$0.80/share represents a premium of about 78.4% over Kreuz's NAV/share as at 30 Sep, and Swiber is expected to record a net gain of about US$90.6m from this proposed disposal. Pending further details from management, we put our Buy rating and fair value estimate of S$0.86 on Swiber under review. (Low Pei Han) CapitaMalls Asia: Divests Grand Canyon Mall in Beijing to CRCT CMA announced that CRCT has exercised its call option to acquire Grand Canyon Mall in Beijing. To recap, this divestment was set in motion in Jul 13 when a conditional call option was agreed upon between both parties as CMA successfully tendered for the asset. The mall is expected to be divested at cost price at ~RMB1.82b (S$367.5m), or ~RMB26k (S$5,249) psm based on GFA (excluding the car park). The mall has been valued at RMB1.83b as at 15 Apr 2013 by CBRE. The current occupancy (as of Apr 2013) is 92.7% with an annualized net property income (NPI) yield of about 3.5%, based on the divestment price. Maintain BUY on CMAwith an unchanged fair value estimate of S$2.55. We also have a BUYrating on CRCT with a fair value estimate of S$1.64. (Eli Lee) COSCO Corporation: Provisions hit bottom-line COSCO Corporation reported a 6% YoY rise in revenue to S$989.4m but saw an 84% drop in net profit to S$4.2m in 3Q13, such that 9MFY13 net profit accounted for 53% of our full year estimate. The results also disappointed the street, as 9MFY13 net profit only made up 42% of the full year consensus figure of S$62.6m. Gross profit margin was only 7.4% in 3Q13 vs. 12.3% in 3Q12, mainly because of a S$33.9m provision for expected losses on construction contracts. A S$15.8m provision was also taken for inventory write-down. This resulted in a net profit margin of 0.4% in the quarter vs. 2.8% in 3Q12. With a change in analyst coverage and pending details from a call with management later, we maintain our SELL rating but put our fair value estimate of S$0.60 under review. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - Singapore's latest PMI exceeded forecasts, showing a stronger pick-up in manufacturing activity in Oct, less than two weeks after an unexpected jump in Sep's factory output. - The Fare Review Mechanism Committee has recommended more public transport fare concessions, with new schemes proposed for low-income workers and people with disabilities. - BBR Holdings said 3Q13 net profit more than tripled to S$8.35m on a busy construction schedule, but warned that there is a challenging year ahead. - Perennial China Retail Trust posted a DPU of 0.95 S cents for 3Q13, down slightly from 0.97 S cents last year. - Chip Eng Seng reported a net profit of S$27.2m for 3Q13, down 10% YoY.

SG: MARKET PULSE: UOB, Midas (11 Sep 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.65

MARKET PULSE: UOB, Midas

11 Sep 2013

KEY IDEA UOB: Tapping on opportunities in Thailand UOB's core Thailand management team is generally positive on its business and growth in Thailand, supported by rising regional trades, higher transactional banking activities and higher affluence. Profit before tax grew from THB1845m in 2010 to THB2927m in 2012 or a CAGR of 26% (FY10-12). Despite this growth, its NPL ratio edged lower from 4.98% in 2010 to 2.12% in 2012. In terms of its loans breakdown, Personal Financial Services (PFS) accounted for the bulk at 45% as of Jun 2013. Some of the key areas of business emphasis include PFS (growing its market share for deposits, credit cards, personal loans, housing loans, etc), Corporates and SMEs. We are maintaining our fair value estimates of S$22.97, but as the share price has recently corrected to S$20.36m, we are upgrading to a BUY. (Carmen Lee) MORE REPORTS Midas Holdings: Keeping the faith The recent public tender for 91 high-speed train sets by China Railway Corporation (CRC) was awarded to CSR Qingdao Sifang, which we believe is a disappointment for Midas Holdings since Midas is not its major supplier. However, we believe that Midas will still be able to secure high-speed contracts in 4Q13, as our channel checks reveal that CRC will also be awarding contracts for 51 high-speed train sets to China CNR via a competitive negotiation. Midas is a key supplier of aluminium alloy extrusion profiles for high-speed trains to China CNR. We estimate potential addressable market size of CNY153m for Midas for this round of procurement. We understand that there may also be another round of procurement by CRC by year end, while 2014 will likely see the bulk of high-speed train car purchases by CRC under China's 12th Five-Year Plan (2011-2015). Maintain BUY and S$0.65 fair estimate on Midas. (Wong Teck Ching Andy)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks rallied on Tue, with the S&P 500 continuing its longest stretch of gains since mid-Jul, after upbeat data from China and amid heightened diplomacy on Syria. - Singapore's local banks have been named Asia's top three safest banks for the third year running, even after Moody's lowered its outlook for the banks to "negative" for the next one to two years. - Asia is not on the verge of financial crisis, despite the recent turmoil in regional equity and currency markets, said Prime Minister Lee Hsien Loong. - Sound Global's controlling shareholders is seeking the delisting of the company from the Singapore Exchange with an exit offer of 70 S cents per share. - United Envirotech yesterday announced that it has signed a S$59m contract to acquire, upgrade and expand a wastewater treatment plant in China. - While mindful of Japan's deep pockets, CapitaMalls Asia is not looking to spin off its assets in that country at the moment.

SG: MARKET PULSE: SembMarine, UOB, Roxy, Cosco, LMIRT, SembCorp (2 Aug 2013)

Stock Name: SembMar
Company Name: SEMBCORP MARINE LTD

Research House: OCBC

Price Call: BUY

Target Price: 5.64

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: HOLD

Target Price: 22.97

Stock Name: Roxy-Pacific
Company Name: ROXY-PACIFIC HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.81

Stock Name: CoscoCorp
Company Name: COSCO CORPORATION (S) LTD

Research House: OCBC

Price Call: SELL

Target Price: 0.60

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.52

Stock Name: Semb Corp
Company Name: SEMBCORP INDUSTRIES LTD

Research House: OCBC

Price Call: BUY

Target Price: 6.48

MARKET PULSE: SembMarine, UOB, Roxy, Cosco, LMIRT, SembCorp

2 Aug 2013

KEY IDEA Sembcorp Marine: New yard opens at a time of record order book Summary: Sembcorp Marine (SMM) reported a 7.6% YoY fall in revenue to S$1.12b and a 12.5% decrease in net profit to S$124.9m in 2Q13, such that 1H13 figures accounted for about 43% of our full year estimates, which we judge to be largely within our expectations. The last quarter saw fewer projects achieving initial recognition; more are expected in 3Q13. The new Tuas yard should also see revenue contribution in 2H13. Operating margin in 2Q13 was 13.0% vs 13.1% in 2Q12. After securing new orders worth about S$3.5b YTD, the group's net order book stands at S$14.4b, a record high in SMM's history. Meanwhile the stock price has appreciated by about 7.3% since our last report on 6 May 2013, and has outperformed the STI by about 11.1% over the same period. Maintain BUYwith S$5.64 fair value estimate. (Low Pei Han) MORE REPORTS UOB: Stronger 2Q and modest rise in NIM Summary: UOB posted 2Q13 net earnings of S$783m, better than consensus estimate of S$699.9m. Net Interest Margin improved modestly from 1.70% in 1Q13 to 1.71% in 2Q13. For the Fee and Commission income, the key outperformers were its Investment-related and credit card operations which showed both YoY and QoQ improvements. Management has declared an unchanged 1H dividend of 20 cents. The group is continuing with its strategy of growing its regional franchise. For its Wealth Management business, AUM has grown from S$48b in 2010 to S$71b as of Jun 2013. We have adjusted our FY13 estimates, lowering impairment charges and increasing operating expenses. We are maintaining our HOLD rating and our fair value estimates of S$22.97, but will turn buyer at S$21.40 or lower. (Carmen Lee) Roxy-Pacific Holdings: $1.1b of revenues to drive earnings growth Summary: 2Q13 PATMI is S$19.5m (EPS: 2.05 S- cents) which increased 10% YoY due to higher property development profits. 1H13 PATMI now cumulates to S$31.2m, forming 40% of our full year forecast. We judge this to be within expectations; earnings are likely to be backloaded in FY13, particularly with an anticipated one-time boost from Wis@Changi upon its TOP in 2H13. The group now sits on S$1.1b of yet unrecognized revenues from sold units - this is equivalent to 8 times FY12 property revenues and would underpin a rigorous earnings growth profile ahead in our view. Maintain BUY with an higher fair value estimate of S$0.81 (25% discount to RNAV) versus S$0.76 previously as we update for latest sales datapoints and a reduced RNAV discount. Key catalysts in 2H13 ahead include the launch of LIV on Wilkie and an earnings boost from Wis@Changi's TOP. We also see a bonus share issue as a possibility in 2H13, which could help the counter's uneven trading liquidity. (Eli Lee) COSCO Corp (Singapore): Another weak quarter Summary: COSCO Corp (Singapore)'s revenue for 2Q13 declined by 9% YoY to S$890m, while net profit fell by 56% to S$12.0m. For 1H13, the group's net profit fell by 61% to S$21.8m, forming 45% and 29% of ours and the street's FY13 estimates respectively. As its operating weakness is more severe than what the street had expected, we think that the street would likely lower its FY13F forecasts. The group's balance sheet is debt-laden with net debt-to-equity ratio at 1.4x and S$1.3b of loans due within 12 months. Should the credit situation in China deteriorates further, the group may become vulnerable. Maintain SELL with unchanged FV of S$0.60. (Chia Jiunyang) Lippo Malls Indonesia Retail Trust: 2Q13 results as expected Summary: LMIRT posted 2Q13 gross rental income of S$40.1m, up 30.2% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions of 15.5% for the existing malls. Distributable income increased by 19.5% YoY to S$20.5m and DPU climbed 17.7% YoY to 0.93 S cents. Results for the quarter were in line with our and consensus expectations. 1H13 DPU of 1.82 S cent forms 50.6% of our FY13 estimate. We maintain our HOLD rating on LMIRT but place our fair value of S$0.52 under review. (Sarah Ong) Sembcorp Industries: Investing in its second energy-from-waste plant in Singapore Summary: Sembcorp Industries (SCI) announced that it will invest over S$250m to build, own and operate a facility capable of producing 140 tonnes/h of steam using industrial and commercial waste collected by its solid waste management operations. This will be SCI's largest energy-from-waste plant in Singapore to date (also its second one here), and will be located on Jurong Island. The project will be funded by bank borrowings and internal resources, and will be completed in early 2016. SCI has a track record of managing such facilities, and its portfolio includes energy-from-waste, biomass and wind power facilities in the UK and China. Maintain BUY with S$6.48 fair value estimate on the stock. (Low Pei Han)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - S&P 500 surpassed 1,700 for the first time, after the Fed announced continued stimulus, jobless claims fell to a five-year low and manufacturing index rose to a two-year high. - Crude palm oil prices in 2Q13 stayed flat QoQ, averaging just above RM2,300 (S$903) per tonne, a steep 30% drop from year-ago levels. - Singapore's manufacturing sector continued to outperform its regional counterparts in Jul, expanding for the fifth consecutive month despite weaker showings across the rest of Asia. - Keppel Offshore & Marine Ltd has secured a contract to build a jack-up rig for US$206m from Parden Holding, a company based in Uruguay. - Parkway Life REIT reported a distribution per unit of 2.63 S-cents for the 2Q13, up 6.1% YoY, as distributable income rose to S$15.9m.

SG: MARKET PULSE: UOB, Genting, LMIRT (3 May 2013)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 22.97

Stock Name: Genting SP
Company Name: GENTING SINGAPORE PLC

Research House: OCBC

Price Call: SELL

Target Price: 1.41

Stock Name: LippoMalls
Company Name: LIPPO MALLS INDO RETAIL TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 0.52

MARKET PULSE: UOB, Genting, LMIRT

3 May 2013

KEY IDEA UOB: Above expectations 1Q UOB Group posted 1Q13 net earnings of S$722m, ahead of consensus estimate. This was buoyed by higher Non-Interest Income, which rose 12% YoY and 13% QoQ to S$708m. Fee & Commission Income jumped 17% QoQ or 25% YoY to S$453m, supported by strong double-digit growth from loans (+63%), fund management (+19%) and Investment (+18%). As 1Q accounted for about 25% of our full year estimate, we made very slight adjustments to our FY13 earnings. Based on P/B of 1.5x, we raised our fair value estimate from S$21.30 to S$22.97. While we continue to like UOB for its good cost controls and strong quarterly performance, the stock has outperformed and appreciated some 11% YTD. It is now trading close to our fair value estimate. As such, we downgrade our rating to HOLD. (Carmen Lee) MORE REPORTS Genting Singapore: 2013 outlook more cautious Genting Singapore (GS) reported 1Q13 revenue of S$669.6m, down 15% YoY and also 16% QoQ, hit by much weaker win percentage (2.12% versus 2.85% theoretical) in the premium players' business; net profit posted a decline of 44% YoY and 13% QoQ to S$115.9m. All in, a pretty muted set of numbers, as top-line only met 20% of our original FY13 forecast while bottom-line met 18% of our full-year number. Going forward, management has turned slightly more cautious, citing the still uncertain global economic outlook, especially with the recent muted economic data coming out of China. We pare our FY13 revenue estimates by 10% and core earnings by 16%. As such, our DCF-based fair value also slips to S$1.41 from S$1.52 previously. Recent run-up in share price seems slightly over-done; hence we downgrade to SELL from Hold on valuation grounds. However, we would buyers closer to S$1.30 or lower. Longer-term catalyst could come from a potential IR license overseas in markets like Japan. (Carey Wong) Lippo Malls Indonesia Retail Trust: 1Q13 results in line LMIRT posted 1Q13 gross rental income of S$39.4m, up 29.3% YoY. The increase was mainly due to the acquisition of the six new malls in 4Q12, and positive rental reversions for the existing malls. The higher gross rental income was partially offset by the effect of FX rates used for translating into SGD revenues denominated in IDR. Results for the quarter were in line with our and consensus expectations; DPU of 0.89 S cent formed 25% of ours and 26% of the street's FY13 estimate. We maintain our fair value of S$0.52 and HOLD rating on LMIRT. We estimate a FY13F yield of 6.7%. (Sarah Ong)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks rose Thurs, with the S&P 500 reaching a new record, after the ECB lowered its benchmark interest rate and US jobless claims fell to a five-year low. - GuocoLand has plans for an integrated mixed-use development at the white site above Tanjong Pagar MRT station. Named Tanjong Pagar Centre, the 290m development will be Singapore's tallest building. - UOB-Kay Hian Holdings has entered into a sales and purchase agreement to dispose of a 93.47% owned subsidiary in Thailand for a total consideration of ~S$40m. - Ezra's subsea division has won a US$75m contract from Statoil. - Innopac Holdings' proposed takeover offer for ASX-listed Merlin Diamonds has received acceptances representing 42.52% of Merlin's issued and paid-up share capital in a little over one month after the offer opened for acceptance.

UOB set to continue delivering strong results: Phillip

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Phillip Securities

Price Call: BUY

Target Price: 21.00

UOB (U11.SG) is likely to continue to deliver strong results for the next few quarters even as the macro economy remains uncertain, Phillip Securities says.

“Loans growth is expected to be moderate, but positive, mitigating the continued pressure on NIMs. Fees and Commission are expected to grow rapidly, driven by strong transaction banking and wealth management performances. Geographically, contributions from UOB’s overseas subsidiaries are expected to increase. UOB may also benefit from an improvement in the China economy, which may drive higher trade volumes and banking services between China and Asean, in which UOB has strong capabilities.”

It raises its target to $21.00 from $18.00 after increasing its forward P/B multiple to 1.35x and rolling forward to FY13 forecasts. It keeps an Accumulate call, continuing to prefer UOB over DBS (D05.SG) and OCBC (O39.SG). UOB is down 0.8% at $19.69.

MARKET PULSE: Banking, Healthcare, Viz Branz, SembMarine, TEE (7 Dec 2012)

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: OCBC

Price Call: BUY

Target Price: 15.94

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 21.30

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: RafflesMG
Company Name: RAFFLES MEDICAL GROUP LTD

Research House: OCBC

Price Call: BUY

Target Price: 2.82

MARKET PULSE: Banking, Healthcare, Viz Branz, SembMarine, TEE

7 Dec 2012

KEY IDEA Banking Sector: Warrants an overweight Banking stocks have done well in 2012, outperforming the STI. Going into 2013, and despite the prevailing cautious mood, we believe that most of the negatives have been priced into the stock prices and low earnings growth for the local banks, and as such, there is a good likelihood that earnings could surprise on the upside. We are going for average earnings growth of 5.5% in 2013 for DBS and UOB versus consensus of only 3.3%, effectively pricing in almost flat growth in 2013. Asia remains the core base for the three banks, and there are still opportunities to cross-sell and leverage on their existing products and services, translating into better fee and other income. We expect corporate activities to also pick up in line with the more optimistic outlook. We have an OVERWEIGHT for the sector and medium term BUY ratings for both DBS [BUY, Fair Value of S$15.94] and UOB [BUY, Fair Value of S$21.30].(Carmen Lee) MORE REPORTS Healthcare Sector: Resilience the key to success As we move into 2013, we remain sanguine on the growth prospects of the healthcare sector, as robust industry fundamentals are structural and entrenched in nature. This implies that the underlying drivers such as a growing and fast-aging population, rising affluence, growing incidence and morbidity of diseases and burgeoning medical tourism activities would likely persist in the long run. The healthcare sector offers investors a unique investment proposition, given its resilient and defensive earnings, while growth opportunities are also favourable in light of the aforementioned factors. The sector also saw the high profile IPOs of IHH Healthcare Berhad and Religare Health Trust in 2012, thus giving investors more options to gain exposure to the thriving regional healthcare scene. We reiterate our OVERWEIGHT rating on the healthcare sector, and recommend Biosensors International Group [BUY; FV: S$1.69] as our top pick, given its superior stent technology, healthy financial position and compelling valuations. We also like Raffles Medical Group [BUY; FV: S$2.82] for its capable management team and strong track record. (Wong Teck Ching Andy) Viz Branz Limited:

Citi upgrades UOB and OCBC

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: Citigroup

Price Call: BUY

Target Price: 20.30

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: Citigroup

Price Call: HOLD

Target Price: 9.75

Citigroup upgraded Singapore banks United Overseas Bank to ‘buy’ from ‘sell’ and Oversea-Chinese Banking Corp
to ‘neutral’ from ‘sell’, citing favourable valuations if net interest margins stabilize and macro data improves in the coming quarters.

While low interest rates and the U.S. Federal Reserve’s latest round of quantitative easing will cap improvements in net interest margins, they may help banks generate healthy treasury and markets income, allowing provisions to remain below normalised levels.

Citi prefers UOB, which has experience dealing with balance sheet issues and looks well positioned to capture fee growth opportunities in the region. It raised its target price for UOB to $20.30 from $18.10.

Both OCBC and UOB need to drive higher contributions from its franchises in Southeast Asia to mitigate pressure on net interest margins, Citi said, increasing its target price for OCBC to $9.75 from $9.15.

By 1:47 p.m., UOB shares were up 1.2% at $18.26, and have gained 19.6% since the start of the year. OCBC rose 0.8% to $9.22, and is up 17.8% since the start of the year, against the Straits Times Index’s 13.7% gain.

MARKET PULSE: UOB, Biosensors, ST Eng, BreadTalk, Yangzijiang, Erza, Midas, UE E&C (8 Nov 2012)

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 21.30

Stock Name: Biosensors
Company Name: BIOSENSORS INT'L GROUP, LTD.

Research House: OCBC

Price Call: BUY

Target Price: 1.69

Stock Name: ST Engg
Company Name: SINGAPORE TECH ENGINEERING LTD

Research House: OCBC

Price Call: BUY

Target Price: 3.90

Stock Name: BreadTalk
Company Name: BREADTALK GROUP LIMITED

Research House: OCBC

Price Call: SELL

Target Price: 0.49

Stock Name: Yangzijiang
Company Name: YANGZIJIANG SHIPBLDG HLDGS LTD

Research House: OCBC

Price Call: HOLD

Target Price: 0.95

Stock Name: Ezra
Company Name: EZRA HOLDINGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 1.30

Stock Name: MIDAS
Company Name: MIDAS HLDGS LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 0.51

Stock Name: UE E&C
Company Name: UE E&C LTD.

Research House: OCBC

Price Call: BUY

Target Price: 0.71

MARKET PULSE: UOB, Biosensors, ST Eng, BreadTalk, Yangzijiang, Erza, Midas, UE E&C

8 Nov 2012

KEY IDEA UOB: Cautiously optimistic UOB posted above market expectations 3Q12 net earnings of S$707m. The main variance was a one-off increase in dividend income for the quarter. As expected, the lending business was tough as net interest margin slipped, from 1.92% in 2Q12 to 1.84% in 3Q12. Fortunately, the non-interest side bucked the trend and grew YoY and QoQ to S$693m. Disciplined cost management led to almost flat cost-to-income ratio of 41.3% in 3Q12. UOB intends to tap on more cross-sell opportunities in the wholesale and wealth space, especially in its regional business, and has also indicated that the retail portion of its fee and commission income should still remain healthy. We tweaked our estimates slightly, raising our earnings to S$2743m. Maintain BUY and fair value estimate of S$21.30. (Carmen Lee) MORE REPORTS Biosensors International Group: Continues to outpace industry growth Biosensors International Group (BIG) reported a 28.3% YoY increase in its revenue to US$79.8m and a 35.6% surge in its core PATMI to US$29.2m for its 2QFY13 results. Revenue missed our forecast by 10.7% but core PATMI matched our S$29.3m estimate, largely due to better-than-expected operating margin and lower effective tax rate. Although licensing revenue was disappointing (-29.4% YoY), we believe that a recovery in 2HFY13 is likely. BIG continued to experience robust growth in the EMEA and Asia-Pacific regions, underpinned by market share gains. Management maintained its 20-30% sales growth guidance for FY13. We have fine-tuned our assumptions and our DCF-derived fair value estimate inches down slightly from S$1.70 to S$1.69. Maintain BUY. (Wong Teck Ching Andy) ST Engineering: In line 3Q12 results 9M12 results were in line with our expectations, with earnings per share of 13.79 S cents (on a fully diluted basis) forming 76% of our FY12F estimate of 18.2 S cents. 3Q12 revenue rose 11% YoY to S$1.542b, EBIT climbed 9% YoY to S$167.6m, PBT increased by 11% and net profit rose 9% YoY to S$146.4m. Commercials sales formed 65% of total sales in 3Q12, up from the 62% for 3Q11. PBT margins for the four main sectors remained flat, at +/-1% versus 3Q11's figures. The group maintained the PBT margin of 12% which it had in 3Q11 and 2Q12. STE expects to achieve higher revenue and PBT for FY12 over FY11. Land Systems (ST Kinetics) has secured a contract to supply a TERREX vehicle for the demonstration phase of the U.S. Marine Corps Marine Personnel Carrier programme. Rolling forward our model, we raise our fair value from S$3.81 to S$3.90 and maintain a BUY rating. (Sarah Ong) BreadTalk Group: No catalyst - give it a miss BreadTalk Group's (BTG) 3Q12 revenue growth was stronger than expected but operating expenditure outpaced revenue growth. Cost pressures associated with food and raw materials saw gross margin fall to its lowest point since listing while higher staff and rental expenses depressed operating margins further. With BTG still focused on expanding its regional footprint, we expect margin pressures and low dividend payouts to persist, and revised our FY13 estimates downwards, which lowers our valuation from S$0.51 previously to S$0.49. Given BTG's recent 7.1% appreciation since mid-Aug, the counter has emerged as expensive especially in the absence of a compelling near-term catalyst. We urge investors to take the opportunity to lock in profits at current levels, and re-enter when the price moderates lower. Downgrade to SELL. (Lim Siyi) Yangzijiang Shipbuilding: Steady earnings in a tough market Yangzijiang Shipbuilding (YZJ) reported a 1% YoY drop in revenue to RMB3.6b and a 14% fall in net profit to RMB877m in 3Q12, such that 9M12 revenue and net profit accounted for 72.5% and 73.3% of our full year estimates. Commercial shipbuilding remains challenging and according to the group, consolidation in the industry is now affecting mid-sized and large-sized yards. In our view, YZJ has performed well in a very challenging environment, and we appreciate management's desire to diversify its income sources and build an integrated marine group. However, the dearth of new orders is likely to persist longer than we expected. We tweak our earnings estimates lower and roll forward our valuations, and based on 7x FY13F core earnings, our fair value estimate slips from S$1.03 to S$0.95. Maintain HOLD. (Low Pei Han) Ezra Holdings: Subsea secures contracts worth US$200m Ezra Holdings (Ezra) announced that it has secured two contracts worth about US$200m from major South Korean clients. Its subsea division won a contract by STX Offshore & Shipbuilding for the engineering, procurement, construction, installation and commissioning (EPCIC) of a turret mooring and subsea system for use in offshore Africa. The engineering and procurement work will commence immediately with offshore execution in 2015. Separately, the subsea division also entered into an agreement with DSME for one of its accommodation and hook-up support vessels, also for Africa. With these contracts, we estimate Ezra's subsea net order book to be around US$900m-US$1b. The industry outlook remains bright and the group has a total bid book of US$4.4b, in which a significant portion is expected to be awarded in FY13. Maintain BUY with S$1.30 fair value estimate. (Low Pei Han) Midas Holdings: Expects net loss in 3Q12 Midas Holdings (Midas) has issued a negative profit guidance prior to its upcoming 3Q12 results release, saying that it expects to report an unaudited net loss. This is below our expectations. Reasons cited were lower revenue, higher operating expenses and finance cost and a share of loss from its associated company, Nanjing SR Puzhen Rail Transport (NPRT). However, Midas still expects to remain profitable for its 9M12 results (1H12 PATMI: CNY16.9m). We had previously highlighted our expectations of weakness in Midas' financial results over the next 2-3 quarters, and our 'buy' rating was positioned on a recovery in its business in FY13. We maintain our BUY rating but our S$0.51 fair value estimate, which is based on 1x FY13F P/B, is under review. Midas will report its 3Q12 results on 14 Nov after trading hours, while an analyst conference call with management has been scheduled on 15 Nov. (Wong Teck Ching Andy) UE E&C: 3Q12 net profit of S$7m UE E&C's revenue and net profit to shareholders increased by 12.2% and 9.5% QoQ respectively to S$96m and S$7m for 3Q12. Although the revenue figure was roughly within our expectations, net profit was below due to lower-than-expected operating margins for its construction and engineering operations. On its balance sheet, net cash position improved to S$119m (end June 12: S$104m). Meanwhile, we also note that the EC/condo market is facing increasing headwinds as the government rolls out a record number of residential sites. We will be speaking with management soon for an update. In the meantime, we put our buy rating and S$0.71 fair value estimate UNDER REVIEW. (Chia Jiunyang)

For more information on the above, visit www.ocbcresearch.comfor the detailed report.

NEWS HEADLINES - US stocks slumped after Barack Obama was re-elected president, as investors' worries turned to the looming fiscal cliff and Europe's ongoing troubles. The Dow fell 2.4% to 12,932.73, its worst day this year, while the S&P 500 Index also slid 2.4% to 1,394.53 and the Nasdaq ended 2.5% lower at 2,937.29. - Petra Foods' 3Q12 PATMI fell 24% YoY to US$10.4m as revenue slid 17% to US$360m, mainly due to lower sales at its cocoa ingredients division, hurt by weak demand. The group's FY12 net profit is likely to be lower than last year's due to the difficulties faced by the cocoa industry.

DBS trims target prices for UOB, OCBC

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: DBS Vickers

Price Call: BUY

Target Price: 10.70

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: DBS Vickers

Price Call: HOLD

Target Price: 19.70

DBS Vickers has trimmed its earnings estimates for Singapore banks for the next two years due to a weaker economic outlook, and cut its target prices for United Overseas Bank and Oversea-Chinese Banking Corp.

Shares of UOB were down 0.2% at $18.57, but have surged 21.6% since the start of the year, outperforming the benchmark Straits Times Index’s 15% gain. OCBC fell 0.1% to $9.23, but have risen 17.9% year-to-date.

The brokerage has lowered OCBC’s target price to $10.70 from $11 and UOB’s to $19.70 from $21, but prefers OCBC for its fee income from its private bank unit Bank of Singapore andinsurer Great Eastern. It maintains a ‘buy’ rating on OCBC and has a ’hold’ on UOB.

DBS Vickers expects Singapore banks to see slower loan growth due to weaker economic growth and the recent property cooling measures introduced by the government. It trimmed its 2013-2014 loan growth rate to 8% from 10% and cut its earnings estimates by 4-7% over the same period.

Pressure on net interest margins are likely to continue, with a hike in Singapore interbank offer rates unlikely until 2015, DBS said.

“Earnings momentum is likely to soften as we go into 2013. As such, we expect banks to trade range-bound and remain well supported by decent dividend yields of 3-4%,” DBS said.

Further upside for Singapore banks limited: Macquarie

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: MacQuarie

Price Call: BUY

Target Price: 20.79

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: MacQuarie

Price Call: HOLD

Target Price: 9.41

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: MacQuarie

Price Call: HOLD

Target Price: 14.56

Further upside for Singapore banks will be limited as growth momentum eases in 2H12 and beyond, Macquarie says. “The stocks are no longer as compelling value ideas as they were earlier this year, but their solid balance sheets and cash yields should sustain valuations.” It keeps the sector at Neutral.

It expects the sector’s 3Q12 operating earnings to rise 18% on-year, mainly on a low 3Q11 base for OCBC and UOB, with earnings to decline 2% on-quarter, amid tightening margins and slowing loan growth. It notes downside risk from credit costs as the city-state enters a “technical recession,” while slowing GDP growth could pressure the SGD, reducing the cash-yield’s attractiveness.

“But overall, we think that the sector is still defensive and on base case assumptions any valuation downside should be limited.” It keeps UOB as its top pick as it has been the most conservative on organic growth and is the least likely to engage in value-destructive M&A; it rates UOB Outperform with $20.79 target. It sets OCBC’s target at $9.41 and DBS’ at $14.56, rating both Neutral.

OCBC is down 1.1% at $9.37, UOB is down 1.7% at $19.19, while DBS is down 1% to $14.06.

Singapore loan demand surprisingly good

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: CIMB

Price Call: BUY

Target Price: 17.28

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: CIMB

Price Call: HOLD

Target Price: 22.47

Singapore’s business loan demand was surprisingly good in August, boosting year-to-date system loan growth to 7.0%, CIMB says.

“The strong manufacturing loan growth could be related to foreign borrowings given the relatively low interest rates for SGD. If sustained, loan growth could go to low teens, potentially exceeding local banks’ loan growth guidance.”

But it keeps a Neutral call on the Singapore bank sector.

“The system is still flush with liquidity, but the margin outlook remains weak given the stiff deposit competition on the ground. Leading credit indicators suggest potential asset quality deterioration.”

It keeps DBS at Outperform with a $17.28 target, as 3Q capital-market-related fees could surprise positively, it keeps UOB at Neutral with a $22.47 target, given fair valuations and rates OCBC at Underperform with a $10.24 target on earnings volatility.

UOB is up 0.15% at $19.68, DBS is down 0.7% at $14.29 and OCBC is down 0.6% at $9.28.

DBS only Singapore bank to own: JPMorgan

Stock Name: DBS
Company Name: DBS GROUP HOLDINGS LTD

Research House: JP Morgan Chase

Price Call: BUY

Target Price: 18.50

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: JP Morgan Chase

Price Call: HOLD

Target Price: 19.50

Stock Name: OCBC Bk
Company Name: OVERSEA-CHINESE BANKING CORP

Research House: JP Morgan Chase

Price Call: HOLD

Target Price: 9.40

DBS is the only stock to own in an otherwise lackluster Singapore banking sector, JPMorgan says, tipping switching out of UOB and OCBC.

DBS’ “bottom-up improvements will have bigger impact on ROE over next two years as top-down trends remain unpromising. Year-to-date, DBS has returned 30%, despite trailing peers post Danamon deal announcement. We expect that overhang to be addressed in the next three to six months, which along with ongoing turnaround should lead to re-rating.”

It rates DBS at Overweight with $18.50 target price. It raises UOB’s target to $19.50 from $18.10 after revising earnings, keeping a Neutral call and recommending investors book profit. It rates OCBC at Neutral with $9.40 target, noting the stock’s rally was based on factors with a low probability of recurrence.

UOB is down 0.1% at $19.64, OCBC is down 0.9% at $9.27 and DBS is down 0.8% at $14.39.

CIMB downgrades UOB to Neutral amid NIM concerns

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: CIMB

Price Call: HOLD

Target Price: 22.47

CIMB downgrades UOB to Neutral from Outperform. “With the highest SGD LDR among local peers, UOB should be the hardest hit in the war for deposits. UOB is probably in deposit gathering mode right now and has been offering attractive fixed deposit promotions. We anticipate above-peers’ NIM compression.”

It notes SME and mortgage competition has capped lending yields in UOB’s typical lending markets, expecting UOB’s NIM gap with peers to gradually close. But it adds, catalysts could come from sustained fee strength, with the bank attempting to monetize relationships from its regional platform.

The stock’s outperformance post-results has largely captured positives from a strong 2Q12, trading at 1.26x 2013 P/BV, which appears fair on a regional comparison basis. It lowers its FY12-14 earnings by 0.2%-0.7% in anticipation of NIM erosion, but raises its target to $22.47 from $21.97 after rolling to 2013 valuations. The stock is down 0.2% at $19.62.

OCBC raises UOB target price

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 21.30

OCBC Investment Research raised its target price for United Overseas Bank to $21.30 from $19.74, citing better-than-expected second-quarter earnings.

By 10:07 a.m., shares of UOB were up 0.7% at $20.09, and have gained 31.6% so far this year, compared to the Straits Times Index’s 15.9%.
UOB posted a 12% rise in its second-quarter net profit to $713 million, helped by strong fee and commission income.

OCBC raised its 2012 earnings estimate for UOB to $2.73 billion from $2.57 billion, and expects the bank’s trade finance and wealth businesses to continue growing.

UOB also announced its chaiman Wee Cho Yaw will step down next year, but OCBC does not expect this to have any impact on business strategy. Wee will be replaced by former Singapore Exchange chief executive Hsieh Fu Hua.

SG: UOB - Exceeded street expectations

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: OCBC

Price Call: BUY

Target Price: 19.74

UOB 10 May 2012

4QExceeded street expectations -1Q beat expectations -Challenges remain, but disciplined business approach -Keeping estimates and FV; maintain BUY UOB Group turned in net earnings of S$688m, which was above market expectations. Improvement was broad based. Net Interest Margin increased from 1.95% in 4Q11 to 1.98% in 1Q12. However, uncertainties remain, and this has reduced medium-term earnings visibility. As we are already above market for our FY12 net profit estimates, we are retaining our FY12 estimates. However, reflecting the lower visibility for the longer term, we have taken the prudent move of still maintaining a higher level of impairment charge for FY13 at S$384m, albeit down from FY12 estimates of S$452m. We are keeping our fair value estimate of S$19.74 as well as our projected dividend payout of 60 cents. Maintain BUY.

United Overseas Bank upgraded to 'outperform' by CIMB

Stock Name: UOB
Company Name: UNITED OVERSEAS BANK LTD

Research House: CIMB

Price Call: BUY

Target Price: 19.42

CIMB in a March 14 research report says: "UOB shed 3.5% in the two weeks post-results. Although the headline 4Q was not strong, we think it hid some positives, namely (1) expanding margins ahead; (2) promising build-up in US$ deposit base, and (3) a 4Q earnings that could have been 11-12% higher, ex-EU losses.

"Our estimates suggest that UOB’s 4Q net profit ($558 million) could have been $60 million-$70 million higher, if we back out losses related to the EU bank debt divestment in 4Q. Headline profit would have been 11-12% higher if this did not show up.

"With UOB's $2.3 billion EU bank debt portfolio (4Q10) whittled down to $0.6 billion (4Q11), we think that UOB will surprise on both trading gains and provisions in 1Q12. Our $19.42 target price (GGM, 1.36x P/BV) is unchanged. UPGRADE TO OUTPERFORM."