|MAYBANK KIM ENG||
Valuetronics (VALUE SP)
PCBA allocation risks priced in
Priced in; maintain BUY
VALUE believes PCBA sales might be pressured if its customer decides to diversify its supplier pool due to the Sino-US trade war. To gauge the downside from such event, we evaluate the impact of an aggressive 50% cut in VALUE’s FY20E PCBA sales. Our simulation suggests a 10% earnings impact, and prospective yield would be 5.9% (current forecast: 6.4%). Given still attractive 41% upside to our ROE-g/COE-g fair value outcome of SGD0.98 (-7% from current TP), we believe such risks are priced in.
Singapore Telecommunications (ST SP)
Stock Trades Below Mean And Offers Diversification Across The Region
Singtel will focus on mitigating declining legacy voice revenue by monetising data growth opportunities while keeping a lean cost structure. The ICT and digital businesses will be drivers for the company, albeit accounting for only 21% of group revenue. The subscription of Airtel rights issue will not derail Singtel from its mandate to pay out dividends of 17.5 S cents per year for FY19 and FY20. Maintain BUY as the stock trades below mean EV/EBITDA with a 5.8% dividend yield. Target price: S$3.58.
Starhill Global REIT (SGREIT SP)
Long Leases Mitigate AEI Impact; Keep BUY
Still BUY with new TP of SGD0.78 from SGD0.80, 11% upside plus 7% yield. Starhill Global REIT, a sector Top Pick, is among the cheapest SREITs – yield 160bps higher than sector average and P/BV of 0.8x, vs sector’s 1.1x. Its Malaysian master lease extensions of 9-19.5 years provide income certainty at the slight expense of upfront capex for AEI. We believe the new master lease is in the unit holders’ best interest amidst the challenging retail market in KL.
Check out our compilation of Target Prices