Phillip 2018 Singapore Strategy: Phillip Absolute 10 December 22, 2017

This report is part of the Phillip 2018 Singapore Strategy Report.

Ascendas REIT – The stable giant

  • Track record of DPU growth through strategy of portfolio rebalancing and stability through diversification
  • Portfolio is positioned to capture opportunities as Singapore evolves towards higher value-added manufacturing
  • ACCUMULATE with DDM-derived target price of S$2.86

Asian Pay Television Trust – An 11% payout in 2018

  • APTV generates stable and recurrent monthly subscription fees from its monopolistic cable TV business.
  • Management has guided 2018 DPU of 6.5 cents (11% dividend yield), unchanged from 2017.
  • Maintain ACCUMULATE rating with a target price of S$0.64.

Banyan Tree Holdings Limited – Patience as partnerships bear fruit

  • Partnerships with Vanke and AccorHotels will provide BTH with a pipeline of management contracts and scale up at a much faster pace than before.
  • Sustained improvements in RevPARs for BTH’s biggest market Thailand (61% of FY16 revenue for Group-owned hotels). We expect RevPAR strength for Thailand to sustain and Maldives (23% of FY16 revenue for Group-owned hotels) to improve in FY18.
  • Maintain ACCUMULATE with a target price of S$0.71.

CapitaLand Limited – Stable base of recurring income

  • Building up a base of quality recurrent income at a CAGR of c.16% (Operating EBIT growth 2013-16). Around 85% of CAPL’s total assets are now earmarked for recurrent income.
  • Office markets in Singapore and China are showing signs of improvement, while RevPAUs for serviced residences experience recovery in key markets.
  • Maintain ACCUMULATE with a target price of S$4.19.

Chip Eng Seng Corporation Ltd – Riding the SG property cycle well

  • Leveraged to the upcycle in Singapore residential property market with available inventory and a replenished land bank.
  • Close to S$200mn (33% of market cap) worth of unbilled development profits to be recognized over the next 3 years from Singapore residential projects already sold.
  • Maintain BUY. We raise our target price to S$1.21, as we narrow the discount to RNAV from 50% to 40% and incorporated construction business into our target price.

ComfortDelGro Corp Ltd – Earnings bottom, dividend level sustainable

  • Earnings to bottom in FY17; from three main factors of 1.) Recognition of higher bus revenue, 2.) Narrowing of DTL losses and 3.) Strategic alliance with Uber, driving FY18 earnings higher
  • Dividend is sustainable, underpinned by strong balance sheet and positive cash flow
  • Maintain BUY; lower target price of $2.63 (previously $2.69)

Dairy Farm International  – Staging a comeback

  • Stronger performance from Health & Beauty, Home Furnishings and Yonghui should mitigate slower sales from Food businesses in Malaysia and Indonesia
  • Improving macro fundamentals, new store and margin gains should underpin growth
  • Maintain BUY with a SOTP-derived target price of US$9.89

DBS Group Holdings Ltd – Poised to Outperform

  • NIM will likely expand 15bps to 20bps to reach c.1.9% in FY18 as benchmark rates rise in its key markets.
  • Digital capabilities will significantly reduce cost to income ratios compared to past performance in previous economic cycles.
  • Expect DBS’ FY18 ROE to reach c.13% on the back of higher loans volume, better lending spreads and normalisation of credit costs.
  • Maintain BUY rating with target price of S$29.30.

Geo Energy Resources Ltd – High growth with 4% yield

  • Production is expected to surge 41.8% YoY in FY17. We expect volumes to continue to grow by 41% YoY to 11mn tonnes in FY18.
  • Removed financing overhang with new $300mn senior note facility.
  • Attractive dividend yield of 4%. Maintain BUY with target price of S$0.44

Micro-Mechanics (Holdings) Ltd – A Turbocharged 2018

  • 1Q18 earnings rose 53%, this is double the growth rate we modelled. Based on the recent industry semiconductors sales, we expect at least another stellar quarter of earnings.
  • MMH enjoys a 15-year track record of 20% earnings CAGR with gross margins averaging 55%.
  • Maintain BUY. Our target price of S$2.50 is 16x PE FY18e. This is in-line with back-end semiconductor valuations.

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