OCBC still bullish on banking stocks after a lacklustre FY18

OCBC still bullish on banking stocks after a lacklustre FY18

By: 
Michelle Zhu
26/03/19, 03:29 pm

SINGAPORE (Mar 26): OCBC Investment Research remains bullish on Singapore’s banking space while keeping its sector “overweight” with “buy” calls on both DBS and UOB, which have been given fair value estimates of $29.31 and $28.30, respectively.

Both stocks had dividend yields of 4.8%, with DBS and UOB trading at the respective book values of 1.3 times and 1.1 times, or at an average of 1.2 times historical book as at the close of Wednesday.

In a Tuesday report, OCBC analyst Carmen Lee notes that raising this average to 1.3 times book and factoring a 10% premium for DBS over the other two years –  as was the case in recent years – would bring the banks’ fair value estimates to “quite similar levels” as those projected by the research house.  

She argues that while 4Q18 results for Singapore’s bank stocks were down, this was “not a complete surprise” considering a weak global market, further highlighting that full year earnings still concluded at record highs for all three banks.

Lee’s positive sector view comes in spite of a fairly lacklustre performance for Singapore’s banking stocks in the year to date (YTD), which she says could be partially due to expectations of lower fee income and that there will not be any further Fed rate hikes for the remainder of the year.

The analyst nonetheless sees another record year for banks in FY19, albeit at a lower single-digit growth in terms in of earnings; making it therefore reasonable to expect the FTSE ST Financials Index (FSTFN) to trade back to the norm, or the 10-year average of 1.1 times book.

“Similarly, with projected record earnings in FY19, it is not unreasonable to expect a re-rating of the banking stocks back to the 10-year average, pending no deterioration in market conditions,” adds Lee.

As at 3:17pm, shares in DBS and UOB are trading at $24.99 and $24.95, respectively.

Right timing: STI’s upclimb supported by momentum and moving averages

SINGAPORE (Apr 20): There has been little change in the trend and chart pattern of the Straits Times Index. The index has been on a very glacial ascent towards 3,420, the target indicated when the index broke out of resistance at 3,190 in mid-Jan. Quarterly momentum eased during the past four trading sessions. The 100- and 200-day moving averages have turned positive. This coupled with positively placed DIs and rising ADX should continue to underpin the STI. The only cautionary signals are the somewhat overbought levels of short term stochastics and 21-day RSI, and stagnant vol....
Read More >>

SMI takes legal action against Hyflux; Maybank moves on Tuaspring

(Apr 20): SM Investments (SMI) has terminated its rescue agreement with Hyflux, it announced on Friday. Hyflux, on its part, had already on April 4 terminated the same agreement with SMI. SMI claims it has thus far abided by the agreement. “To clarify, SMI does not accept the purported termination of the Restructuring Agreement by Hyflux on 4 April 2019. This is because the termination was not in accordance with the terms of the Restructuring Agreement," said SMI. Under the agreement reached last October, SMI, led by Indonesian tycoon Anthoni Salim, was to have invested $530 million in....
Read More >>

CCT reports 3.8% higher 1Q DPU of 2.20 cents on higher property contributions

SINGAPORE (April 19): The manager of CapitaLand Commercial Trust (CCT) has reported a 1Q19 distribution per unit (DPU) of 2.20 cents, rising 3.8% y-o-y from 2.12 cents due to higher contributions from Gallileo and Asia Square Tower 2. Gross revenue and net property income (NPI) for the quarter increased by 3.5% and 3.4% to $99.8 million and $79.8 million, respectively. This comes after booking contributions from Gallileo – an office building in Frankfurt, Germany which the trust acquired a 94.9% stake in during June 2018 – as well as higher occupancy at Asia Square Tower 2, both of w....
Read More >>