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Hi-P International (HIP SP)

Risk-Reward Not Yet Favourable


2Q18 in line; still, it all hinges on 4Q18

2Q18 PATMI was in line with our forecast, falling 19% YoY despite a surprise 8% YoY increase in sales on higher volumes. This is a concern as we may have underestimated pricing pressures; hence, we trim FY18-20E EPS 10-17%. 3Q18 product ramp-up appears intact, although 4Q18 hinges on the reception of the products of HIP’s key wireless and IOT customers. ROE-g/COE-g TP is cut 12% to SGD1.27, based on 1.8x FY18E P/B (prev: 2.0x), based on FY18-20E average ROE of 14.8% and COE of 9%. HOLD.


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ST Engineering (STE SP)

Earnings Growth And Strong Balance Sheet Should Lead to Further Outperformance


We expect STE to report a 5-7% growth in net profit for 2Q18, driven by: a) strong growth in the electronics division, b) a low-base effect at the marine shipbuilding segment, and c) likely improvement from the engine & component segment for the aerospace division. STE also affirmed that the imposition of tariffs on steel is unlikely to impact existing contracts for the marine sector. On the valuation front, STE is trading at just 1.6x P/S, vs a 10-year average of 1.64x, and 1SD below mean PE. Maintain BUY. Target: S$4.10.


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Frasers Logistics & Industrial Trust

3QFY18 results in line


■ 3Q/9MFY9/18 DPU of 1.8/5.4 Scts was in line with expectations at 25%/75% of our FY18 forecasts.

■ Portfolio occupancy was 99.3% while Australian rent reversion was almost flat in 3Q.

■ Gearing increased to 36.3% post the European acquisition.

■ Maintain Add call and our target price of S$1.24.


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China Aviation (Singapore) Oil

Margin improvement from underlying business



 2Q18 net profit exceeded our expectations due to higher than expected gross profit.

 Total volumes grew together with margin improvement.

 More modest growth in profits from associates due to Pudong’s underperformance.

 The acquisition of Navires Aviation Limited is expected to generate synergies.

 We raise our FY18e EPS by 6% to 11.6 US cents due to the improvement in profit margins and a profit contribution from the recent acquisition. Based on an average forward 12-month PER of 12.8x, we maintain our BUY call with an unchanged target price of S$2.00 for FY18.


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DBS: Growth momentum to continue


DBS reported 2Q18 net earnings of S$1.33b, below market expectations of S$1.44b. This was largely due to a decline in trading income in 2Q18. DBS declared a first halfdividend of 60 cents (versus 33 cents previously). The shares will trade ex-dividend on 8 August 2018.Management is cautiously optimistic, sharing that business momentum continues to be healthy, especially for cards, wealth and SME. Going forward, current trade tensions could impact Asian economies and together with property cooling measures, this could impact loans growth in 2019.Apart from lower trading income, there were broad-based improvements in 2Q18. We adjusted FY18 earnings down from S$5874m to S$5812m. Our fair value estimates drop from S$32.67 to S$31.83. At current price of S$26.50, dividend yield is 4.5%. Maintain BUY.


Indofood Agri Resources


Undemanding but lacks catalyst

TP lowered to S$0.21, maintain HOLD rating.

We have accounted for the unexpected losses in 2Q18, and lower profitability contribution from sugar business in 2H18, and its ex. LSIP plantation division in FY18 and FY19. This, we lowered FY18/19F earnings by 45%/3%. Moving forward, we see some scope of a rebound in earnings in 2019, albeit limited due to still low profitability from Indofood Agri Resources (IFAR)’s edible oils and fats segment.


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