Stretching the limit
■ SATS will release its 4QFY3/17 results on 19 May. We expect SATS to report 4QFY17 net profit of S$60m-63m and final DPS of S$0.11.
■ To sustain its 23x FY18 P/E valuation or +2.5 s.d. of 5-year mean, SATS needs to achieve at least 10% EPS growth in FY18F, which we believe may be a stretch.
■ Our target price is raised to S$5.17, still based on blended valuations of DCF and P/E (19x), to incorporate our EPS tweak from lower cost assumptions.
Midas Holdings: Decent start to the year
Midas Holdings Limited’s (Midas) 1Q17 revenue grew 31.3% YoY to RMB398.4m, mainly due to the consolidation of results of its recently business. While 1Q17 overall GPM fell 3.1ppt YoY to 27.9%, Midas’ share of profits of its associate recorded a 359.3% YoY increase. Consequently, 1Q17 PATMI was within expectations as it grew 187.6% YoY to RMB28.7m. Looking ahead, we expect revenue to be higher as new businesses contribute in FY17 along with growth from its core AEP business while overall GPM to decline given this change in sales mix. Midas also announced yesterday that it has been awarded 13 international and PRC supply contracts worth a total of RMB520.9m, which in our view are positive for Midas’ growth. All said, we believe Midas’ growth outlook still largely hinges on the ramp up and execution of its new start-up business – JMLA. With in-line 1Q17 results, we made slight adjustments to our forecasts and lower our FV from S$0.255 to S$0.245 (based on 0.6x FY17F P/B). Maintain HOLD.
Global Market Review
Risk-on environment is here to stay for now
MACRO | STRATEGY | GLOBAL ASSET ALLOCATION
Recap on the first quarter of 2017 Events
President Trump fail to repeal the Affordable Care Act (ACA) aka Obamacare.
United States launched 59 Tomahawk missiles into Syrian airfield in response of a chemical weapons attack that killed dozens of civilians by the Assad regime.
North Korea testing of its nuclear program has inflamed President Trump and U.S. have responded by sending one of their aircraft carrier to the Korea peninsula.
President Trump made peace with China president Xi Jinping and toned down his tariffs talk in hope that China can help subdue the unruly North Koreans.
In Europe, a French revolution in politics is under way, as the first round of election saw Marine Le Pen and Emmanuel Macron going through to the second round of election.
Moon Jae-in was elected as the new president of South Korea after the after the impeachment of former president Park Geun-hye. The incumbent Park was officially removed from office on 10 March 2017 following her political scandal.
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Exports Contract on Volatile Pharma, Electronics Healthy
Non-Electronics Fall After Five Months of Acceleration
Singapore’s export recovery came to a sudden halt in April as the sharp decline in pharmaceuticals weighed on non-oil domestic exports (NODX). NODX declined for the first time in six months by -0.7% from a year ago, dragged down by the fall in non-electronic products (-2.9%) while electronics growth (+4.8%) moderated slightly from March (+5.2%). Non-oil re-exports, a proxy for wholesale trade services, fell by -0.1% from a year ago after four months of improvement, also weighed down by non-electronics (-3.8%).
4Q/FY17 Results Flash Note
Singtel released its 4Q/FY17 results this morning. FY17 core earnings formed 98% and 100% of our /consensus estimates respectively, in line with management’s guidance. Key highlight was the weaker associate showing (Airtel hit by aggressive competition) that offset the growth in mobile data, ICT and digital revenues. An expected final DPS of 10.7 cent/share (payable in August) brings FY17 DPS to 17.5cents/share. This reflects a payout of 73%, ie at the higher-end of its guidance (60-75%). Maintain NEUTRAL and SGD4.00 TP (7% upside)
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