Phillip 2018 Singapore Strategy: Phillip Absolute 10 December 22, 2017 1871

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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Regarding APTV, which it was stated that it pays 11%DY, and it generates stable and recurrent monthly subscription fees from its monopolistic cable TV business.

However, for the past years, according to the information from SGX stockfacts, APTV is payout ratio is more than 100%.

May I know:
What is Philips’ timeframe for this stock?
Is the business is sustainable in the long term, that it pays out more than it earns?
Or what is the reason for its high payout ratio?


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