ANALYSTS SAY: Buy, Sell, Hold (19 Apr '18)

1Q18: KREIT (In line);
Ascott Residence Trust ART (Below Expectations)

KREIT’s 1Q18 DPU declined 2.1% yoy, mainly on lower contributions from 275 George Street. Management guided an upbeat office sector outlook. Maintain BUY and target price of S$1.43.

ART’s 1Q18 results were below expectations, mainly due to dilution from the S$442.7m rights issue to fund acquisitions of Ascott Orchard Singapore and German properties, and lower-than-expected income streams from these assets. Maintain HOLD and target price of S$1.23. Maintain OVERWEIGHT.

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DBS Group Holdings (DBS SP)

1Q18 Earnings Preview: NIM And Wealth Management Up; Credit Costs Down

We expect DBS’ 1Q18 results to be characterised by NIM expansion of 5bp yoy and continued growth in fees from wealth management, which expanded 12.6% yoy to S$250m despite a high base for 1Q17. With NPL formation for exposure to the oil & gas sector out of the way, we expect lower credit costs of 28.3bp compared with 72.3bp last year. Maintain BUY. Target price: S$31.08.

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Banks

1Q18F preview: the perfume of Goldilocks lingers

■ It is all systems go for DBS as we expect the bank to record 1Q18F net profit of S$1,443m (+16% yoy).

■ Similarly, we expect healthy loan growth and sustained fee momentum for OCBC, and expect it to record 1Q18F net profit of S$1,160m (+19% yoy).

■ We believe UOB could surprise on higher NIM and lower credit costs (1Q18F: S$948m, +17% yoy). With a change in accounting, CIR would look lower.

■ We have, across-the-board, upgraded our TPs.

■ Higher rates, sustained fees, benign credit environment, leaner capital structure and digitalisation gains should propel banks’ ROEs. Maintain Overweight; top pick: DBS.

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Keppel Corporation

Gainful quarter

■ 1Q18 net profit of S$337.4m (+29% yoy) formed 33% of our and consensus FY18F with the recognition of enbloc gain (S$289m) from Keppel China Marina.

■ Given the lumpiness of property divestment gain, we deem the results to be a slight miss because of reported losses in O&M (-S$23m) and investment (-S$43m).

■ On a positive note, efficiency gains have kicked in for O&M as EBIT margin swung positively to 2.4%. We keep our 7% EBIT target for FY18 as we expect a better 2H18.

■ With no major land sale in Tianjin Eco City, the investment division was further dragged by mark-to-market losses and delayed 4Q17 losses in Kris Energy.

■ Maintain Add and unchanged TP of S$10.00 (SOP valuations). We see catalysts from 1) O&M recovery, 2) redevelopment of property projects and 3) higher dividend.

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