Banking on more patience
■ Fed rates left unchanged at 2.25-2.5% amid lowered GDP, inflation and unemployment estimates. The Fed projects zero hikes in 2019 and 1 in 2020.
■ Singapore banks’ NIMs should still see upside in 2019. Average 3MSIBOR rose to 1.92% in 3M19 while mortgage board rates have repriced upwards.
■ Maintain Overweight. We think the pause in rate hikes has been priced into valuations, although a rate cut could be a key de-rating catalyst.
ComfortDelGro Corporation (CD SP)
In Anticipation Of A Smoother Ride
The taxi industry has improved slightly in recent months, in contrast to the slump seen during the days of intense competition with private hire operators. There may be brighter days ahead as proposed regulations could diminish the appeal for private hire drivers. We assess prospects for CD from an uplift from the taxi segment as well as a turnaround in the Downtown Line. Maintain BUY with a higher PE-based target price of S$2.77 (previously S$2.66).
|DBS VICKERS||MAYBANK KIM ENG|
Frasers Property Ltd (FPL SP) : BUY
The Greatest Showman
• Frasers Property Ltd acquiring another 29.99% stake in PGIM Real Estate AsiaRetail Fund for S$601.5m, at a price only marginally higher than the last acquisition; cost of total acquisition amounts to S$958m
• Total effective stake (including Frasers Centrepoint Trust’s stake) increases to 54.9% from 24.3%
• With a controlling stake, the strategy to “double down” as one of Singapore largest retail landlords is unfolding • Potential divestment of non-core assets (such as Liang Court) will provide near-term earnings lift
|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.
Check out our compilation of Target Prices