| UOB KAYHIAN |
MAYBANK KIM ENG |
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Singapore Airlines (SIA SP) Lowering Earnings Forecast And Target Price On Concerns Over Cargo Profitability
We lower our FY19 net profit forecast by 16% due to a potential decline in cargo traffic. 2MFY19 cargo traffic fell by 1.9% yoy. A potential reduction in exports to China due to the US’ trade protectionism and gradual economic slowdown could also lead to lower air cargo demand and revenue. We lower our fair value from S$12.60 to S$11.90 as we reduce P/B from 1.0x to 0.95x. Downgrade SIA to HOLD. Suggested entry: S$10.90.
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Singapore Property Buying Opportunity
Housing recovery intact; remain POSITIVE With the demand-supply outlook still supportive of a housing recovery, we expect the recent home-price rally to continue and see buying opportunities during the current share-price weakness. Speculative buying is near its historical low while existing measures continues to ensure financial prudence amongst property buyers. As such, we see no need for further policy tightening. We attribute 5M18’s soft developer sales to a lack of new launches, not a sign of market weakness. We believe housing demand remains strong, going by healthy overall volumes, including secondary market transactions. Remain POSITIVE on the sector with UOL as our top pick among the large caps and GuocoLand among the mid-caps. Risks include a sharp rise in interest rates and property price falls. Sector benchmark CDL trades at 21% discount to RNAV vs parity in the early stages of a property upcycle.
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| CIMB | OCBC |
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■ May sales surged 53% mom to 1,121 units. ■ Pace of new launches has accelerated; take-up rates remain healthy. ■ Maintain sector Overweight. Top picks remain UOL and City Developments. May sales surged 53% mom
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Starhill Global REIT: Time is not yet ripe
Starhill Global REIT: Time is not yet ripeWe retain our cautious stance on the S-REITs sector, and view the relatively more hawkish statement by the FOMC last week as a potential dampener to sentiment ahead. Starhill Global REIT (SGREIT) has underperformed its peers, with total returns of -12.2% YTD. We believe this can be largely attributed to its tepid DPU performance and challenging near-term outlook. We lower our FY18 and FY19 DPU forecasts by 5.7% and 6.5%, respectively. Our revised forecasts reflect our expectations of continued softness in SGREIT’s DPU growth outlook in the near-term (4QFY18F: -4.3% YoY; FY18F: -6.7%). Coupled with a lower terminal growth rate and higher cost of equity assumption in light of the current market and sector volatilities, we cut our fair value estimate on SGREIT from S$0.77 to S$0.65. Although SGREIT is trading at FY19F distribution yield of 7.1%, as of the closing price on 18 Jun 2018, this is slightly below its 10-year average forward yield of 7.2%. Maintain HOLD. |
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