Brokers' take

Compiled by Anita Gabriel

HUTCHISON PORT HOLDINGS TRUST | HOLD

FAIR VALUE: US$0.42

NOV 22 CLOSE: US$0.42

OCBC Research, Nov 22

Hutchison Port Holdings Trust's (HPHT) management still keeps to its FY17 distribution per unit (DPU) guidance of 20 to 23 Hong Kong cents, which translates to 6.1 per cent to 7 per cent FY17 dividend yield.

Management expects a much milder decline in average selling price (ASP) and low single-digit throughput growth in Kwai Tsing and Yantian International Container Terminals.

With much of the impact from the new shipping alliances already expressed this year through ASP weakness, it is probable that HPHT will not see another round of steep DPU declines next year.

Current unit prices are not particularly attractive - we see a much clearer value proposition at US$0.39 and below.

Those tracking industry data may be concerned with the 0.9 per cent year-on-year decline recorded in Hong Kong's Kwai Tsing container throughput for last month.

We believe this figure is skewed by the data from Modern Terminals, hence we are maintaining the positive throughput growth assumption for HPHT's Hong Kong ports in FY17.

OFFSHORE & MARINE SECTOR | OVERWEIGHT

KEPPEL CORP | ADD

TARGET PRICE: $8.58

NOV 22 CLOSE: $7.53

SEMBCORP MARINE | ADD

TARGET PRICE: $2.49

NOV 22 CLOSE: $1.84

CIMB Research, Nov 21

The sector is ripe for re-rating - crude oil price has recovered close to some offshore projects' average break-even levels and FY18F (forecast) project sanctions are expected to stay firm.

Higher year-to-date crude oil prices and the Energy Information Administration's forecast of marginal production deficit this year suggest that strategies of oil producers (Opec cuts) have worked.

Mergers and acquisitions (M&A) have gained traction, signalling that companies are consolidating/tying up to emerge bigger and leaner in anticipation of a sector recovery.

We favour Singapore yards (large-cap stocks) for this rally as we believe they will be the first beneficiaries of the upcoming production and gas contracts.

Sembcorp Marine is our near-term pick given its three-month under-performance versus Keppel Corp. Keppel is our 12-month top pick for its multiple growth drivers - O&M, property and investments.

SINGAPORE BANKS

Credit Suisse, Nov 20

United Overseas Bank and OCBC Bank reported profits above expectations due to higher loan growth and improvement in net interest margins (NIM).

Singapore banks saw loan growth above the mid-single digits thus far and have officially moved up their guidance to the high-single digits. Banks expect NIM to rise in FY18.

We note that OCBC may follow its peers and conduct a kitchen-sinking exercise in Q4 17.

We factored in a lower cost of equity for DBS Bank and UOB given that they have cleaned up their oil and gas loan book to reduce asset quality risks.

We raise our target prices from $25.30 to $27.40 for DBS, from $27.10 to $29.30 for UOB and from $11.70 to $12.60 for OCBC.

Disclaimer: All analyses, recommendations and other information herein are published for general information. Readers should not rely solely on the information published and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.