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UOB KAYHIAN |
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REITS A Timely Relief; Maintain OVERWEIGHT
Maintain OVERWEIGHT, Top Picks: Suntec REIT, ESR REIT and Manulife US REIT. The latest move to raise gearing threshold and deferral of interest coverage requirement is a pre-emptive move that should help REITs from an unanticipated breach of gearing limit. REITs will also have greater flexibility to manage cash flow with the extension of timeline to distribute 90% of taxable income. Overall, the move is positive for the sector, particularly highly geared REITs. Industrial and Office REITs are our preferred sub-sector.
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DBS Group Holdings (DBS SP) 1Q20 Results Preview: Held Up By Healthy Growth In January And February
We forecast net profit of S$1,236m for 1Q20, down 25.1% yoy and 18.0% qoq. We expect mild NIM compression of 2bp qoq and mid-single-digit growth in fees of 6.3% yoy. We expect a surge in credit costs to 60bp (2019: 18bp), driven by higher general provisions. We foresee DBS adopting a conservative stance to trim dividends by 9.1% to 30 S cents per quarter, supported by reactivating its scrip dividend scheme. Maintain BUY. Target price: S$22.10.
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RHB |
DBS VICKERS |
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ST Engineering (STE SP) Moderating Aerospace Earnings; Reiterate BUY
Reiterate BUY with new SGD4.65 TP from SGD4.90, 35% upside and 4.3% yield. Amidst an unprecedented aviation traffic decline, airlines are now in cash-preservation mode: Grounding most of their fleets, accelerating older aircraft retirement, and likely deferring maintenance works on existing fleets. We trim 2020-2022 estimates 4-8% on a weak revenue outlook for aviation MRO. ST Engineering remains our Top Pick, given its relatively resilient and well-diversified business portfolio that offers strong revenue visibility from a record-high orderbook and earnings contributions from recently completed acquisitions.
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Japfa Ltd (JAP SP) : BUY Welcoming Meiji as its dairy partner in China
• Meiji to acquire 25% minority stake in Japfa’s China dairy business, along with raw milk supply contract • Transaction amount of US$254m values the business at c.10x EV/EBITDA, 2x P/BV; gain of US$37m • Proceeds to be applied towards term loan repayment • Minor dilution to earnings estimated, but a positive move; maintain BUY
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Check out our compilation of Target Prices
