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Author: traderhub8   |   Latest post: Fri, 15 Nov 2019, 2:21 PM

 

Phillip Capital Morning Note - 15 Nov 2019

Author: traderhub8   |  Publish date: Fri, 15 Nov 2019, 2:21 PM


The S&P 500 inched higher on Thursday to a record close, but persisting worries around U.S-China trade relations and declines in Cisco Systems and Walmart tempered the excitement around Wall Street.

The broad index closed just 0.1% higher at 3,096.63 as the real estate and material sectors outperformed. The Dow Jones Industrial Average, however, closed marginally lower at 27,781.96 while the Nasdaq Composite dipped 0.04% to 8,479.02.

Oil prices fell on Thursday as U.S. crude futures were pressured by a build in domestic inventories and record production, while forecasts from the Organization of the Petroleum Exporting Countries for a lower-than-expected oil surplus supported Brent.

Concert promoter UnUsUaL Limited's earnings improved for the second quarter, jumping 54.8 per cent year-on-year to S$5 million, on stronger promotion and production revenue.

Straits Trading Company on Thursday posted a 13.2 per cent drop in net profit to S$12.2 million for its third quarter ended Sept 30, due to a halving in earnings from its real estate segment, despite a more profitable resources division.

SINGTEL posted its first quarterly loss on Thursday with a S$668 million net loss in the second quarter, against profit of S$667 million before, on its S$1.93 billion pre-tax share of Bharti Airtel's provision for the past dues.

UOB Kay Hian Holdings on Thursday posted a 14.7 per cent increase in net profit to S$20.3 million for its third quarter ended Sept 30, as higher trading volume and retail participation across its main regional markets boosted turnover.

Consumer group Fraser and Neave (F&N) on Thursday posted a 23.5 per cent increase in net profit to S$152.6 million for FY19, due to higher contributions from its beverages and dairies segments.

Sembcorp Industries on Thursday posted a 13 per cent decline in net profit for the third quarter ended Sept 30, as higher finance costs mainly arising from its marine and energy businesses took a toll on the bottomline.

Hong Leong Asia on Thursday announced third-quarter net profit rose 9.2 per cent to S$3.4 million, even as gross profit declined, as lower profit was attributed to non-controlling interests.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

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Phillip Capital Morning Note - 14 Nov 2019

Author: traderhub8   |  Publish date: Thu, 14 Nov 2019, 12:30 PM


The Dow and S&P 500 floated higher on Wednesday, inching to fresh records despite multiplying reports that US and Chinese trade officials are still struggling to conclude a partial bargain.

EAGLE Hospitality Trust's (EHT) distributable income (DI) for the three months ended Sept 30 was US$14.4 million, down 1.2 per cent from the US$14.5 million projected at the point of listing, the real estate investment trust (Reit) announced on Wednesday.

YANGZIJIANG Shipbuilding's third-quarter net profit slid 10 per cent year-on-year to 702.3 million Chinese yuan (S$136.3 million) amid an overall weak market.

TUAN Sing Holdings' Q3 net profit plunged 95 per cent to about S$206,000 from S$3.8 million a year ago, the property developer announced on Wednesday.

Net profit for Hong Leong Finance's third quarter ended Sept 30 dived 35.7 per cent to S$23.6 million from S$36.7 million a year ago, it reported in a Singapore Exchange filing on Wednesday.

OUE Commercial Reit (OUE C-Reit) on Wednesday posted a third-quarter distribution per unit (DPU) of 0.79 Singapore cent, up 43.6 per cent from a DPU of 0.55 cent for the same period a year earlier, thanks to gains from its merger with OUE Hospitality Trust in September.

ACCORDIA Golf Trust's distribution per unit (DPU) for the half-year ended Sept 30 rose 54.5 per cent to 2.07 yen (2.61 Singapore cents), from 1.34 yen a year ago, the highest distribution since the trust was listed in August 2014.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

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Phillip Capital Morning Note - 13 Nov 2019

Author: traderhub8   |  Publish date: Wed, 13 Nov 2019, 12:49 PM


US stocks ended mixed on Tuesday but the Nasdaq posted a new record even though investors still have not received clarity on an agreement to end the US-China trade war.

NET loss for Ezion Holdings swelled to US$75.4 million in the third quarter ended Sept 30 from a net loss of US$8.06 million a year ago, it announced in a Singapore Exchange filing on Tuesday.

Raffles Education Corporation narrowed its net loss for the first quarter to S$8 million versus S$19.8 million a year ago as revenue picked up, it announced on Tuesday.

Net profit for Centurion Corporation rose 21 per cent to S$8.8 million in the third quarter ended Sept 30, the student and worker dormitory operator said in a Singapore Exchange filing on Tuesday.

MAINBOARD-LISTED food and beverage player BreadTalk Group has posted an 81 per cent drop in its third-quarter net profit, weighed down by an over 34 per cent spike in distribution and selling expenses.

City Developments Limited's (CDL) third-quarter net profit sank 33.7 per cent year-on-year to S$114.96 million, weighed down by impairment losses and transaction costs arising from Millennium & Copthorne Hotels' (M&C) delisting last month.

CATALIST-LISTED investment firm Pine Capital, which had recently been in a legal tussle with its former chairman, expects to post a wider net loss for the half-year ended Sept 30.

CROMWELL European Reit (Cromwell E-Reit) on Tuesday reported that its distribution per unit (DPU) for the third quarter ended Sept 30 rose 1 per cent to 1.01 euro cents from one cent a year ago.

Source: SGX Masnet, The Business Times, Bloomberg, Channel NewsAsia, Reuters, PSR

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DBS Group Holdings Ltd-Substantial Provisioning Overlay to Cushion Credit Risks

Author: traderhub8   |  Publish date: Tue, 12 Nov 2019, 3:49 PM


  • 3Q19 revenue and PATMI exceeded our estimates by 4% and 7% respectively.
  • NII supported by 4bps YoY NIM expansion to 1.90% as loans were repriced with higher interest rates in Singapore and Hong Kong. Loans growth softer at 4% YoY.
  • Fee income at a record high of $814mn. Strong trading income growth of 22% to $431mn due to higher gains in interest rate activities.
  • CIR% well contained, improving 2p.p. from a year ago to 42%.
  • Declared a quarterly dividend of 30 cents per share. We forecast 2019 dividend of $1.20/share.
  • Maintain ACCUMULATE at a lower target price of S$27.30 (previous TP: S$27.60). Our TP is based on target price-to-book of 1.4x, derived from the Gordon Growth model (long term ROE assumption: 12.4%, COE: 9.3% (Beta: 1.2x), Growth: 2.0%).

The Positives

+ NIM held up at 1.90%. NIM expanded 4bps YoY as assets yield rose 14bps YoY (due to stronger hold up of SIBOR and HIBOR, and push-through of loan repricing), outpacing the rise in funding costs of 10bps YoY. NIM contracted 1bps QoQ, reflecting the lower interest rate environment. In view of three rate cuts, DBS expects a softer 4Q NIM with full-year NIM be below guidance and may come in at 1.88% instead of previously expected 1.90%. DBS guided NIM to decline by around 7bps in FY20 from FY19 average NIM. We maintain our FY19e NIM at 1.89% and lower our FY20e NIM forecast by 7bps to 1.82%.

+ Fee income at a record high of $814mn due to wealth management, card fees and investment banking fees. AUM rose 9% YoY to S$241bn as DBS continues to attract net new money inflows from mid-to-ultra high net worth individuals, as well as from the region. The consistent momentum in the wealth management segment will support a more stable income base.

+ CIR well contained, improving 2p.p. from a year ago to 42%. Positive JAWS resulted in improvement in CIR with well-managed expenses. DBS expects CIR to be weaker in FY20 and a negative JAWS to be likely next year due to low-single-digit income growth expectations while the Group continues to invest in technology and manpower.

 

The Negatives

– Allowances rose 8% YoY. Additional general allowances of $61mn taken as a prudent measure given the ongoing political and economic uncertainty. General provisions stood at $2.9bn, of which expected credit loss reserves made up $2.6bn. DBS is at the prudent end of its provisioning policy with a substantial overlay to cushion the portfolio. NPL ratio unchanged at 1.5% while specific allowances of $197mn were 21bps of loans for 3Q19, in line with recent quarters’ levels.

 

– Loans growth soft at 4% YoY. Overall loans growth was stable on quarter as growth in non-trade corporate loans and non-housing consumer loans offset by declines in trade loans and housing loans. DBS guided FY20e loans growth to have a similar pace as FY19e’s 4% YoY.

Investment Actions

Maintain ACCUMULATE at a lower target price of S$27.30 (previous TP: S$27.60). Our TP is based on target price-to-book of 1.4x, derived from the Gordon Growth model (long term ROE assumption: 12.4%, COE: 9.3% (Beta: 1.2x), Growth: 2.0%).

Dividend yield support. We forecast FY20 DPS of $1.20, giving a 4.5% dividend yield support.

 

 

 

Total income increased 13% to a new high of SGD S$3.82bn from loans growth of 4% YoY, record fee income (+17% YoY) and higher trading gains (+22% YoY).

Wealth management fees rose 22% to $357mn from higher investment product sales. Card fees grew 9% to $202mn from increased transactions across the region. Investment banking fees more than doubled to $55mn as equity and debt capital market activities increased. Transaction service fees grew 7% to $190mn as both cash management and trade finance fees were higher.

Other non-interest income grew 35% to $549mn. Trading income increased 22% to $431mn from higher gains in interest rate activities. Net gain on investment securities doubled to $105mn.

Gross customer loans rose 4% from a year ago in constant-currency terms to $358 billion. The growth over the 12 months was driven by corporate non-trade loans from broad-based activities across the region.

 

 

 

 

 

Source: Phillip Capital Research - 12 Nov 2019

Labels: DBS
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Asian Pay Television Trust – Running But at the Same Spot for Now

Author: traderhub8   |  Publish date: Tue, 12 Nov 2019, 3:48 PM


  • Revenue was in line, but EBITDA was marginally below our estimates. Expenses such as content and staff cost were higher than modelled.
  • Broadband reported record net additions of 9,000 subscribers in 3Q19. But revenue was still down 5% due to weaker ARPU .
  • Falling revenue is still the biggest challenge. We estimate revenues will fall S$9mn in FY20e (FY19e down S$25mn). The annual dividend pay-out of S$17.4mn per annum is well funded by adjusted FCF of $46m. Nevertheless, it will be challenging for the stock to outperform until investors get some visibility of revenue stabilising. We believe the rollout of data backhaul services for 5G in 2021 will be the opportunity for revenue to stabilise or even grow. We peg APTT at around 9.5x EV/EBITDA. This is a 20% discount (prev. 15%) to their much larger Taiwanese peer valuations. We maintain NEUTRAL and keep our target price unchanged at S$0.165.

  

The Positives

+ Record additions in broadband subscribers. Broadband subscribers rose by 9,000 to 232,000 in 3Q19. A post-IPO high. Nevertheless, revenue still declined due to an 11.5% YoY contraction in ARPU. 

+ Content cost re-contracting helps. Most of the operating cost for APTT is relatively stable. A lever to offset falling revenue has been content cost. The content cost has been renegotiated lower since last quarter.

The Negatives

– Core cable TV subscribers still dropping. Subscribers have been declining since 1Q18 and lowering prices had little impact on stemming this declining.  A positive is that ARPU contracted NT$2 per quarter this year, compared to NT$5 per quarter in FY18. 

– Capex sticky and not helping revenue. APTT is investing upfront in deploying more fibre into their network. So far there has not been a significant return on this investment, judging by the lacklustre rise in broadband revenue. The bulk of the returns on this investment should materialise when APTT sells data backhaul service to 5G mobile operators in Taiwan.

 

Outlook

We believe FY20e will follow similar trends of weak revenue, EBITDA and subscribers. The headwinds facing cable TV such as video piracy, IPTV competition and lower regional pricing is unlikely to tapper down anytime soon.

A positive next year should come from capital expenditure where management expects to trend downwards from FY20e. The improvement in FCF can be deployed to pare down debt.

 

Maintained NEUTRAL and target price unchanged at S$0.165

We maintained our target price at S$0.165. We cut our FY20e EBITDA by 4% as we lowered revenue by 3%. We peg APTT at around 9.5x EV/EBITDA. This is a 20% valuation discount (prev. 15%) to its much larger Taiwanese peers (Figure 2).

The committed two-year (FY19e and FY20e) DPU of 1.2 cents per year will provide some stability to the share price. Any upside or re-rating can only come when revenues begin to stabilise, in our opinion.

Figure 1: Core business decline started in 2018

 

Figure 2: Taiwanese peers pay a dividend yield of 4.2% and trade at 11.5x EV/EBITDA.

 

Source: Phillip Capital Research - 12 Nov 2019

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Phillip Capital Morning Note - 12 Nov 2019

Author: traderhub8   |  Publish date: Mon, 11 Nov 2019, 5:15 PM


  • Results were largely in line with our expectations.
  • VMS is gaining more customers and projects, partially due to the shift in supply chain to SEA
  • Net margin declined to 9.8% from 10.5% a year ago from pricing pressure we expect it to continue in the near-term.
  • Downgrade to ACCUMULATE with a lower TP of S$17.18 (prev. S$17.68). We revised our FY19e revenue upwards by 2.5% and lowered NPAT by 2.8%. We are still positive on VMS for the attractive yield and rising profit share amongst its U.S. peers.

The Positives

+ Gaining more customers and projects. VMS continues to grow its customer base. The on-going disruption in the electronics supply chain in China is benefiting VMS. We now know that VMS serves ~130 customers globally, up from ~100. An example of a new customer would be a young technology company recently listed in the United States with a market capitalisation of ~US$6bn. VMS expects new and several key products launch over the next 12mths. Anticipating these launches, we have adjusted both FY19e/FY20e revenue upwards by 2.5%.

The Negatives

– Pricing pressure affecting margins. VMS has been undergoing pricing pressure from existing customers. Although only less than 2% of total revenue is directly impacted by the trade war, we suspect the repercussions may be slightly greater. Anecdotally, we gathered that customers have been using the trade war as a reason to pressure the electronics supply chain to lower prices, even if their products are not affected by existing tariffs. We expect this trend to continue and hence expect near-term softness in net margins. VMS still boast an impressive profit margin of 9.8% (vs 1.5% average U.S. listed peers).

Outlook

VMS is supporting several partners in their new and key product launches and will continue to benefit from the shift in supply chain by Original Equipment Manufacturers (OEMs) to mitigate tariffs. The group expects to see traction in its entries into new technology domains and ecosystems. We are still optimistic about VMS’ long-term growth potential because of the healthy pipeline of projects.

Downgrade to ACCUMULATE with a lower TP of S$17.18 (prev. S$17.68)

We revised our FY19e revenue upwards by 2.5% and lowered NPAT by 2.8%. Our valuation is based on a 14X PE multiple of FY19e profits. We like VMS for its robust balance sheet, and deep value creation abilities owing to its strong R&D team.

Source: Phillip Capital Research - 11 Nov 2019

Labels: Venture
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