Compiled by Anita Gabriel
TELECOM SECTOR | NEUTRAL
OCBC Research, Nov 23
All three telecommunications service providers reported decline in earnings for various reasons.
The Singapore telecom sector represented by FTSE Straits Times Telecommunications Index has been tracking the Straits Times Index's performance closely until March 17, when it started to diverge and has since, been underperforming the STI.
Given intense competition, we expect the sector outlook to be muted and continue to project average revenue per user to decline 14 per cent to 20 per cent over the next five years.
However, within the sector, we reiterate a "buy" for Singtel (fair value at $4.19) which is our top pick, supported by a forward dividend yield of 5.6 per cent.
We are positive on Singtel's longer-term outlook given its growing presence in the digital space. We also see limited downside to its near-term dividend payout with the $2.3 billion cash received recently from the initial public offering of NetLink Trust.
All considered, maintain "neutral" on the sector.
OXLEY HOLDINGS | BUY
TARGET PRICE: $0.743
NOV 23 CLOSE: $0.63
UOB Kay Hian, Nov 22
With the $311 million acquisition of Mayfair Gardens, Oxley continues to have the second largest residential land bank among listed property stocks in Singapore.
Management believes in fast-tracking its Singapore launches, ahead of the slew of launches from the current collective sale wave, which may start hitting the market from second half of next year and 2019.
Overseas execution has been progressing well, in the UK, Ireland, Cambodia and Indonesia, while China and Malaysia have been experiencing delays.
The strong earnings visibility is backed by $2.3 billion in unbilled contracts, which will be progressively recognised, consisting mainly of projects in the UK (Royal Wharf), Cambodia (The Peak and The Bridge) and Indonesia (Oxley Convention).
Maintain "buy" with a higher target price of $0.74, pegged at a 20 per cent discount to our revalued net asset value.
OCBC | BUY
TARGET PRICE: $13.50
NOV 23 CLOSE: $11.97
UOB | BUY
TARGET PRICE: $27.50
NOV 23 CLOSE: $25.83
DBS Group Research, Nov 22
We have more conviction on the impact of several drivers next year on banks - the Sibor rally has kick-started, hence the net interest margin acceleration ahead will be quite certain; while there were still upsets in the oil & gas sector, these were dealt with in Q3 FY17, so credit costs should ease; and loan growth has picked up and should sustain on a positive GDP outlook.
These factors should drive valuations up further but the banks' ability to keep a clean asset quality trend would be most crucial to shift valuations above mean.
We have "buys" on both OCBC Bank and United Overseas Bank. Our preference for OCBC lies in its wealth management, especially its insurance business. The IFRS 9/SRFS 109, which no longer allow general provision buffering, would be positive to UOB.
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