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Singapore Airlines (SIA SP)

Virgin Australia's Exceptional Loss And A 40% ytd Rise In Jet Fuel In 2QFY19 Do Bode Well For Quarterly Earnings


We lower our FY19 net profit forecast by 12.3% as we factor in an additional S$91m in losses from 20%-owned Virgin Australia (VAH) which declared an exceptional loss of S$632m in FY18. SIA should recognise about S$137m loss from VAH in 2QFY19. We also expect a weak 2QFY19 due to a 42% yoy rise in jet fuel costs, notwithstanding an excellent August where pax load factors improved 4.3ppt for the group. We lower our fair value to S$10.40. Maintain HOLD. Entry price: S$9.10.


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Property Devt & Invt


Slower Aug sales

■ Aug private home sales showed selective buying post cooling measures, in our view.

■ We think that fast asset turn and good sell-through rates are key to margin preservation.

■ Stay sector Neutral. Our sector top picks are City Dev, UOL and HoBee Land.


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NetLink Trust (NETLINK SP)

Post-Initiation FAQ


Resistant to operational risks; maintain BUY.

Following our recent initiation of NetLink, we summarise key issues raised by investors and maintain our positive view on its underlying defensive business. We believe our forecast of a 95% fibre connection penetration rate by FY21E is viable and that 5G is more likely an opportunity than threat. Maintain our DDM-based (COE of 6%, LTG 0%) TP of SGD0.93 and BUY. Any challenge to its current level of regulated returns is the main risk to our outlook.


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SATS Ltd: Embracing technology and innovation


Amidst all the concerns about trade tensions between the US and China, investors have been wary and this has been reflected in the share market. Indeed, along with the weakness in the broader market, the share price of SATS Ltd has dropped by about 7% from its recent peak in end Jul compared to the STI’s 6% drop over the same period. SATS is poised to benefit from growth in global air passenger and cargo volumes along with increasing demand for travel and related services. With regards to this, SATS has been turning to automation and technology to increase productivity and reduce reliance on manpower costs. The group’s ROE has increased from 12.8% in FY14 to 16.2% in FY18 and its dividend has also increased by S$0.01/share each year from S$0.13/share in FY13 to S$0.18/share in FY18. At current prices, there is an estimated 3.85% dividend yield along with growth prospects. Upgrade to BUY with the recent share price correction.




NIM Widening Trend Intact


We remain bullish on DBS, with unchanged SGD30.30 TP giving 22% upside. We believe the key catalyst for the stock is the US FFR’s rising trend widening DBS’ NIM going forward. After the early July property cooling measures, subsequent show-flat visits by potential buyers suggest good demand for upcoming launches as developers lower selling prices – this should support mortgage loan demand. DBS’ CAR should also be strengthened by the recent raising of its Additional Tier 1 capital.


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Sasseur REIT


Up up and away

• First S-REIT with exposure to China’s fast growing outlet mall industry

• Downside protection via entrusted management agreement with minimum revenue guarantee by Sponsor

• Further upside from tapping visible acquisition pipeline

• Initiate with BUY call and TP of S$0.91


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LionelLim8.16Check out our compilation of Target Prices