Stick with these quality companies for upside in 2018, says OCBC

Stick with these quality companies for upside in 2018, says OCBC

Stanislaus Jude Chan
14/12/17, 11:12 am

SINGAPORE (Dec 14): OCBC Investment Research says upside remains even as 2018 is unlikely to see a repeat of the “stellar gains” this year.

Year-to-date, the benchmark Straits Times Index (STI) has climbed 20% on the back of the financial and property sectors.

The financial sector led the way as the best performing sub-index in the Singapore market, with year-to-date gains of 31%. This was followed by the Real Estate Holding and Development Index, which surged 27%. The Singapore REIT index also performed well, rising 19%.

“While valuations have moved up this year, earnings have correspondingly shown good growth,” says OCBC analyst Carmen Lee in a 2018 Strategy report.

However, Lee notes that valuations are still inexpensive despite the strong double-digit gains.

“The STI is currently trading at forward PER of 14.4x (for FY18) and 13.4x (for FY19), giving a decent dividend yield of 3.3%. Price to book has moved up from 1.1x as at end-2016 to about 1.3x currently,” says Lee.

According to Lee, the worst appears to be over for Singapore banks in terms of oil and gas exposure.

“Net Interest Margins (NIM) have shown improvement in 2017 and banks have reflected the bulk of their exposures to the beleaguered oil and gas (O&G) sector,” says Lee. “Having taken the hit from the O&G sector, we expect allowances to revert to the norm from next year.”

OCBC’s top pick for the sector is DBS Group Holdings.

The research house is projecting a 25% increase in net earnings for DBS for FY18.

OCBC has a “buy” call on DBS with a fair value estimate of $27.40.

As at 10.51am, shares of DBS are trading 27 cents lower at $25.03.

On the property front, the URA Private Property Index saw its first uptick in 3Q17 after close to four years of decline.

Meanwhile, the pace of collective sales has quickened in the second half of 2017, with close to $7 billion of en bloc transactions already announced so far this year. This is the highest amount of transactions since 2007, which topped the list with total sales of $11.5 billion.

“Historically, en-bloc uptrend tends to point to market recovery,” says Lee. “With current higher land transaction prices, this also indicates that average selling prices are likely to head higher when these properties are re-launched in the coming years.”

OCBC’s top picks among the property stocks are CapitaLand, City Developments, UOL Group, Wheelock Properties, and Wing Tai Holdings.

The research house has “buy” calls on all five, with fair value estimates of $4.13, $13.50, $9.70, $2.27, and $2.77, respectively.

As at 10.51am, shares of CapitaLand are trading 3 cents higher at $3.54, shares of City Developments are trading 25 cents lower at $12.40, shares of UOL Group are trading 10 cents lower at $8.62, shares of Wheelock Properties are trading 1 cent higher at $1.90, and shares of Wing Tai Holdings are trading 1 cent lower at $2.29.

For the REITs, OCBC says it favours Frasers Centrepoint Trust, Frasers Logistics and Industrial Trust and Mapletree Greater China Trust.

The research house has “buy” calls on all three with fair value estimates of $2.40, $1.25, and $1.28, respectively.

As at 10.51am, units of Frasers Centrepoint Trust are trading flat at $2.21, units of Frasers Logistics and Industrial Trust are trading flat at $1.12, and units of Mapletree Greater China Trust are trading 1 cent higher at $1.20.

$1,379 – that's how much an elderly person needs to survive in the world's most expensive city

SINGAPORE (May 22): Just how much does a single, elderly person aged over 65 years who lives alone in Singapore need to cover his basic needs? Some $1,379 a month, according to a team of researchers led by assistant professor Ng Kok Hoe of the Lee Kuan Yew School of Public Policy (LKYSPP) at the National University of Singapore (NUS). If the name sounds familiar, it is because Dr Ng had in 2017 conducted the first count of Singapore’s homeless people. Singapore has shied away from defining a poverty line, or setting a minimum wage. But, for the first time, a group of researchers has....

3 key reasons for UOB's confidence in PropNex despite 1Q earnings miss

SINGAPORE (May 22): UOB Kay Hian is maintaining “buy” on PropNex while lowering its target price to 60 cents from 66 cents previously. The new target price is based on DCF and 2019F P/E of 10 times with reference to its closest listed competitor, APAC Realty, and comes after cutting net profit estimates by 11% to 15% for 2019-21F to reflect a shift in gross profit mix as well as higher staff cost assumptions. UOB’s downwards earnings revision follows the release of PropNex’s 1Q19 results, which fell short of expectations due to lower project marketing contributions as a result of....

6 protesters killed as Indonesia election rally turns violent

SINGAPORE (May 22): At least six people were killed and hundreds more injured in clashes between police and supporters of Indonesian presidential candidate Prabowo Subianto in the worst political violence to hit Jakarta in two decades. Jakarta Governor Anies Baswedan appealed for public order and urged police to exercise restraint and avoid conflict with the protesters in the capital city. About 200 injured protesters have been admitted to various hospitals in Jakarta, Baswedan told reporters. The violence is the worst since to grip the city since the downfall of Suharto in 1998. Protest....